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Slide 11 of 27

Contango Steepens

Heating oil futures are normally in "contango" this time of year, which means more distant months are higher priced than nearby months. But this year, with a very weak market and very high stocks, current prices are much more depressed than normal relative to more distant prices.

This is partially the result of what has been happening worldwide in crude oil and petroleum product markets. Crude oil has been in contango for most of 1998, with nearby prices lower than more distant prices. Since crude oil is the major feedstock from which distillate is made, it has had a downward influence on the distillate price curve.