Target price for crude oil lowered

Transcription

1 May 25, 21 Commodity Outlook Target price for crude oil lowered The latest OECD leading economic indicators for both China and Brazil declined markedly. This points to a clear slowdown of economic growth rates in these countries and is thus a warning sign for industrial commodities. Depending on the sector, China is responsible for 4%-8% of the additional demand for commodities. It is therefore not surprising that the markets are monitoring the development of the leading indicators very closely. During the last contraction phase between November 27 and December 28, prices of industrial metals fell almost 8%; the crude oil price declined 7%. However, this development will not be repeated this time. On the one hand, we do not expect a worldwide recession. On the other hand, the commodity market is by no means as overheated and driven by speculation as back then. Moreover, China will probably exploit low commodity prices again to build a strategic reserve. We are, however, lowering our forecast for crude oil (WTI) for 21 from USD 85 to USD 8 per barrel, and for 211 from USD 15 to USD 9 per barrel. Beyond that, we are lowering our target price for aluminum for 211 from USD 2,35 to USD 2,1 per ton. We expect the rate of growth of oil consumption in the emerging markets to slow considerably. As a result, the current negative characteristics of the oil market, such as OPEC s high free production capacity and the high stockpiles, thus become longer-term stress factors. OECD OIL STOCKPILES REMAIN ABOVE THE 5Y AVERAGE 2 15 Deviation of OECD industrial crude oil and products inventories to 5Y average Energy WTI Brent Natural gas Unit $/Barrel $/Barrel $/MMBTU current % 1M in 3 M in 6 M Ø 1Q Ø 2Q1E Ø Ø Ø Industrial metals Copper Aluminum Unit US$/MT US$/MT current % 1M in 3 M in 6 M Ø 1Q Ø 2Q1E Ø Ø Ø Precious metals Gold Silver Platinum Unit $/Ounce cts/ounce $/Ounce current % 1M in 3 M in 6 M Ø 1Q Ø 2Q1E Ø Ø Ø Quelle: Thomson Financial Datastream, UniCredit Research 1 barrels per day Jan-5 May-5 Sep-5 Jan-6 May-6 Sep-6 Jan-7 May-7 Sep-7 Jan-8 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan-1 Source: IEA, UniCredit Research Author Jochen Hitzfeld (UniCredit Bank) jochen.hitzfeld@unicreditgroup.de Bloomberg UCGR Internet UniCredit Research page 1 See last pages for disclaimer.

2 May 25, 21 KEY EVENTS US Department of Energy 5/26/21 16:3 US inventories of crude oil, gasoline and distillates International Energy Agency 6/1/21 Monthly oil market report Source: UniCredit Research OECD leading indicators for China and Brazil weaken The latest OECD leading economic indicators are a clear warning signal for the industrial commodities. In most OECD countries, there are tentative signs of a growth slowdown. In China and Brazil, however, the signs of a slowdown in growth dynamic are clear. This is eye-catching news, since China, depending on the sector, is responsible for 4%-8% of the additional demand for commodities. In March, the leading indicators fell.3 points. This is the third consecutive decline, which is now also very pronounced (see chart). WEAKENING IN THE OECD LEI FOR CHINA POINTS TO PHASE OF WEAKNESS FOR METAL PRICES 3 25 Monthly change in the OECD LEI for China (RS) DJ UBS Industrial metals Prices for industrial commodities expected to weaken This awakens memories of the last phase of steady decline from November 27 to December 28. At the time, the DJ UBS Industrial Metals Index, for example, lost almost 8% at the peak, and the oil price 7%. At the time, however, the negative development started during a pronounced phase of euphoria about the emergence of the BRIC countries in general and China in particular. The oil price was trading at USD 147 per barrel, and copper at USD 8,94 per ton. The subsequent pullback was then also overstated by the unwinding of speculative positions. The first half of 28 saw a strong recovery, because China exploited the extremely low prices to create a strategic stockpile. This would be the case again today in the event of a major setback and would therefore limit its extent. For this reason, we expect falling prices for industrial commodities over the next three to six months, but we do not expect the pullback to be as extreme as in 27/ Lower target prices for crude oil /7 7/7 1/8 7/8 1/9 7/9 1/1 Source: Thomson Financial Datastream, OECD, UniCredit Research The decline in the OECD LEI for China looks set to continue in the months ahead. This is suggested by the impending key rate hike and the implementation of further measures to cool the booming real estate market. At the moment, there is talk of imposing a property tax. This has already triggered a 2% pullback of the equity market this year, with the result that the Chinese equity market has by definition entered a bear market. The only equity markets that have exhibited an even poorer performance than the Chinese equity market this year are the Greek and Cypriot markets. This is a further leading indicator that suggests industrial commodity prices will weaken So far, we had assumed a relatively steady rise in the price of crude oil. Our target price for crude oil (WTI) for 21 was USD 85 per barrel, and for 211 USD 15 per barrel (in each case calendar year average). Our base scenario assumed substantially stronger demand for crude oil than the consensus, specifically from the Asian emerging markets. On the other hand, we assumed weaker crude oil production of the Non-OPEC countries. This scenario has, however, become less probable with the clear turning point in the OECD Leading Economic Indicators for China and Brazil. At least for the next six months, the growth of consumption of industrial commodities will now weaken. This is already becoming visible in the volume of crude oil processed in China. In April, the average was again 8.4 mb/d, but the yoy growth rate already fell from 31% to 16.9%. UniCredit Research page 2 See last pages for disclaimer.

3 May 25, 21 CHINA: GROWTH OF OIL CONSUMPTION SLOWING mn b/d 9. China: Processed crude oil % yoy (RS) Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan consumption. Most industrialized countries hold 5 days of consumption as a minimum reserve. In the past, OPEC increased production at roughly 53 days of consumption. A fall-off in demand would increase the inventories in days of consumption substantially. The inventories would initally increase again and then daily consumption would decline. For this reason, the oil price will regain momentum at the earliest in 211. We are therefore lowering our target price (WTI) from USD 85 to USD 8 per barrel for 21 and from USD 15 to USD 9 per barrel for 211. STOCKPILES TOO HIGH Source: Bloomberg, UniCredit Research If, however, the growth of consumption in emerging markets slows, OPEC s free production capacity will remain very high over an even longer period. This high level of free capacity arose as a result of the OPEC decision in December 28 to cut effective oil production because of the financial crisis by 4.2 mb/d from the September 28 level of mb/d. In addition, some new oil production projects came on stream. The roughly 6 mb/d free OPEC production capacity becomes a stress factor as soon as the growth of the global economy slows. In the projection of the International Energy Agency (IEA), the free production capacity will remain at a high level in the next five years if the global economy grows at an average rate of only 3% per year. OPEC S FREE PRODUCTION CAPACITY REMAINS TOO HIGH OECD industrial crude oil and products inventories, in days of demand Critical value for the OPEC to raise production Source: IEA, UniCredit Research Aluminum target price for 211 reduced mb/d Free production capacity of OPEC For most industrial metals, we had already been expecting a weaker performance in the second half of 21. Our 21 target prices for copper and aluminum can therefore remain unchanged. For 211, our target price for aluminum had, accordingly, been higher than the consensus because of the higher energy costs. Parallel to the oil forecast, we are therefore also lowering our target price for aluminum for 211 from USD 2,35 to USD 2,1 per ton. 1 YTD Target Remainder Current average price 21E of the year Source: Bloomberg, UniCredit Research An additional factor weighing on the oil price are the stockpiles, which are still too high. The industrial stockpiles (i.e. excluding the strategic stockpiles of, for example, the US) of the OECD countries totaled roughly 2.74 billion barrels at the end of April. This translates into approximately 61 days of Copper 7,321 6,8 6,475 6,55 Aluminum 2,215 2,1 2,28 1,984 Jochen Hitzfeld jochen.hitzfeld@unicreditgroup.de UniCredit Research page 3 See last pages for disclaimer.

4 May 25, 21 COMMITMENT OF TRADERS REPORT NON-COMMERCIAL TRADERS WTI: STRONG DECREASE OF NET LONG POSITIONS USD/barrel 16 WTI (LS) Non-commercial net position (RS) /5 8/5 3/6 9/6 4/7 11/7 6/8 1/9 8/9 3/1 NATURAL GAS: STILL EXTREMELY HIGH NET SHORT POSITION USD/mn British Thermal Units Natural Gas ( LS) Non-commercial net position (RS) 1/5 8/5 3/6 9/6 4/7 11/7 6/8 1/9 8/9 3/ GOLD: VERY HIGH NET LONG POSITION SILVER: NEUTRAL 14 Gold (LS) Non-commercial net position (RS) 3 21 Silver (LS) Non-commercial net position (RS) 8 USD/ounce /5 8/5 3/6 9/6 4/7 11/7 6/8 1/9 8/9 3/1 USD/ounce /5 8/5 3/6 9/6 4/7 11/7 6/8 1/9 8/9 3/ COPPER: STRONG DECREASE OF NET LONG POSITIONS WHEAT: RELATIVELY HIGH NET SHORT POSITION 9 Copper (LS) Non-commercial net position (RS) Wheat (LS) Non-commercial net position(rs) 12 USD/ton /5 8/5 3/6 9/6 4/7 11/7 6/8 1/9 8/9 3/1 cents per bushel /5 8/5 3/6 9/6 4/7 11/7 6/8 1/9 8/9 3/1 UniCredit Research page 4 See last pages for disclaimer.

5 May 25, 21 US STOCKPILES CRUDE OIL GASOLINE Average MIN MAX Average MIN MAX Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 17 Source: Bloomberg, DOE, UniCredit Research Source: Bloomberg, DOE, UniCredit Research HEATING OIL NATURAL GAS Average MIN MAX , 3,5 Average MIN MAX 21 4, 3, , 3, bn cubic feet 2,5 2, 1,5 2,5 2, 1,5 bn cubic feet , 1, Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 9 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Bloomberg, DOE, UniCredit Research Source: Bloomberg, DOE, UniCredit Research Key: The bars show the average of the last 5 years. The vertical lines show the range of the last 5 years. The triangle shows the last value reported for this month in 21. UniCredit Research page 5 See last pages for disclaimer.

6 May 25, 21 GLOBAL OIL PRODUCTION, 21 FORECAST, OPEC SCENARIO, MN BPD 29 1Q1 2Q1 3Q1 4Q1 21 Change 21/9 Volume % North America % Western Europe % OECD Pacific % Total OECD % Other Asia % Latin America % Middle East % Africa % Total DCs % FSU % Other Europe % China % Total "Other" Regions % Total non-opec production % Processing gains % Total non-opec supply % previous estimate OPEC NGLs + non-conventional oils % Total OPEC supply % TOTAL OIL SUPPLY % Source: OPEC Monthly Oil Market Report GLOBAL OIL DEMAND, 21 FORECAST, OPEC SCENARIO, MN BPD 29 1Q1 2Q1 3Q1 4Q1 21 Change 21/9 Volume % North America % Western Europe % OECD Pacific % Total OECD % Other Asia % Latin America % Middle East % Africa % Total DCs % FSU % Other Europe % China % Total "Other" Regions % Total World % previous estimate revision Source: OPEC Monthly Oil Market Report UniCredit Research page 6 See last pages for disclaimer.

7 May 25, 21 COPPER SUPPLY AND DEMAND, ICSG FORECAST , IN 1, TONS Regions Mine Production Refined Production Copper Usage ('T) Africa 952 1,76 1,345 1, , North America 2,189 1,929 2,12 2,257 2,19 1,782 1,792 1,887 2,542 2,48 2,156 2,235 Latin America 6,967 7,37 7,438 7,562 3,77 3,937 4,39 4, Asean ,18 1, Asia ex Asean/CIS 1,49 1,54 1,544 1,589 6,767 7,57 7,559 8,34 8,7 1,544 9,856 1,41 Asia-CIS EU ,566 2,511 2,656 2,715 3,815 3,14 3,224 3,349 Europe Others , ,17 1,36 1, Oceania 1,43 1,24 1,122 1, Total 15,387 15,756 16,85 17,31 18,232 18,41 19,467 2,544 18,6 18,26 17,937 18,851 Adjustment for Primary Feed Shortage Allowance for Disruptions ,189 World 15,387 15,756 16,85 17,31 18,232 18,41 18,515 19,94 18,6 18,26 17,937 18,851 % change 2.4% 6.7% 3.%.9%.6% 3.1% 1.1% -1.5% 5.1% Refined Production -Usage Balance Source: International Copper Study Group GOLD SUPPLY AND DEMAND, WORLD GOLD COUNCIL, TONS % change 29 vs. 28 4Q8 1Q9 2Q9 3Q9 4Q9 % change 4Q9 vs. 4Q8 Supply Mine production Net producer hedging Total Mine supply Official sector sales Old gold scrap Total Supply Identifiable demand Jewelry fabrication Industrial and dental Bar & coin retail investment Other retail investment Exchange traded funds & similar Total identifiable demand Balancing Figure Source: World Gold Council UniCredit Research page 7 See last pages for disclaimer.

8 May 25, 21 Disclaimer Our recommendations are based on information obtained from, or are based upon public information sources that we consider to be reliable but for the completeness and accuracy of which we assume no liability. All estimates and opinions included in the report represent the independent judgment of the analysts as of the date of the issue. We reserve the right to modify the views expressed herein at any time without notice. Moreover, we reserve the right not to update this information or to discontinue it altogether without notice. This analysis is for information purposes only and (i) does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to buy or subscribe for any financial, money market or investment instrument or any security, (ii) is neither intended as such an offer for sale or subscription of or solicitation of an offer to buy or subscribe for any financial, money market or investment instrument or any security nor (iii) as an advertisement thereof. The investment possibilities discussed in this report may not be suitable for certain investors depending on their specific investment objectives and time horizon or in the context of their overall financial situation. The investments discussed may fluctuate in price or value. Investors may get back less than they invested. Changes in rates of exchange may have an adverse effect on the value of investments. Furthermore, past performance is not necessarily indicative of future results. In particular, the risks associated with an investment in the financial, money market or investment instrument or security under discussion are not explained in their entirety. This information is given without any warranty on an "as is" basis and should not be regarded as a substitute for obtaining individual advice. Investors must make their own determination of the appropriateness of an investment in any instruments referred to herein based on the merits and risks involved, their own investment strategy and their legal, fiscal and financial position. As this document does not qualify as an investment recommendation or as a direct investment recommendation, neither this document nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever. Investors are urged to contact their bank's investment advisor for individual explanations and advice. Neither UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit CAIB Securities UK Ltd., UniCredit Securities, UniCredit Menkul Değerler A.Ş., UniCredit Bulbank, Zagrebačka banka, UniCredit Bank, Bank Pekao, Yapi Kredi, UniCredit Tiriac Bank, ATFBank, nor any of their respective directors, officers or employees nor any other person accepts any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection therewith. This analysis is being distributed by electronic and ordinary mail to professional investors, who are expected to make their own investment decisions without undue reliance on this publication, and may not be redistributed, reproduced or published in whole or in part for any purpose. Responsibility for the content of this publication lies with: a) UniCredit Bank AG, Am Tucherpark 16, 8538 Munich, Germany, (also responsible for the distribution pursuant to 34b WpHG). The company belongs to UCI Group. Regulatory authority: BaFin Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 6439 Frankfurt, Germany. b) UniCredit Bank AG London Branch, Moor House, 12 London Wall, London EC2Y 5ET, United Kingdom. Regulatory authority: BaFin Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 6439 Frankfurt, Germany and subject to limited regulation by the Financial Services Authority (FSA), 25 The North Colonnade, Canary Wharf, London E14 5HS, United Kingdom. Details about the extent of our regulation by the Financial Services Authority are available from us on request. c) UniCredit Bank AG Milan Branch, Via Tommaso Grossi, 1, 2121 Milan, Italy, duly authorized by the Bank of Italy to provide investment services. Regulatory authority: Bank of Italy, Via Nazionale 91, 184 Roma, Italy and Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 6439 Frankfurt, Germany. The UniCredit CAIB Group, consisting of d) UniCredit CAIB AG, Julius-Tandler-Platz 3, 19 Vienna, Austria Regulatory authority: Finanzmarktaufsichtsbehörde (FMA), Praterstrasse 23, 12 Vienna, Austria e) UniCredit CAIB Securities UK Ltd., Moor House, 12 London Wall, London EC2Y 5ET, United Kingdom Regulatory authority: Financial Services Authority (FSA), 25 The North Colonnade, Canary Wharf, London E14 5HS, United Kingdom f) UniCredit Securities, Boulevard Ring Office Building, 17/1 Chistoprudni Boulevard, Moscow 11, Russia Regulatory authority: Federal Service on Financial Markets, 9 Leninsky prospekt, Moscow , Russia g) UniCredit Menkul Değerler A.Ş., Büyükdere Cad. No. 195, Büyükdere Plaza Kat. 5, Levent, Istanbul, Turkey Regulatory authority: Sermaye Piyasası Kurulu Capital Markets Board of Turkey, Eskişehir Yolu 8.Km No:156, 653 Ankara, Turkey h) UniCredit Bulbank, Sveta Nedelya Sq. 7, BG-1 Sofia, Bulgaria Regulatory authority: Financial Supervision Commission, 33 Shar Planina str.,133 Sofia, Bulgaria i) Zagrebačka banka, Paromlinska 2, HR-1 Zagreb, Croatia Regulatory authority: Croatian Agency for Supervision of Financial Services, Miramarska 24B, 1 Zagreb, Croatia j) UniCredit Bank, Na Príkope 858/2, CZ Prague, Czech Republic Regulatory authority: CNB Czech National Bank, Na Příkopě 28, Praha 1, Czech Republic k) Bank Pekao, ul. Grzybowska 53/57, PL--95 Warsaw, Poland Regulatory authority: Polish Financial Supervision Authority, Plac Powstańców Warszawy 1, -95 Warsaw, Poland l) UniCredit Bank, Prechistenskaya emb. 9, RF-1934 Moscow, Russia Regulatory authority: Federal Service on Financial Markets, 9 Leninsky prospekt, Moscow , Russia m) UniCredit Bank, Šancova 1/A, SK Bratislava, Slovakia Regulatory authority: National Bank of Slovakia, Stefanikovo nam. 1/19, Kremnica, Slovakia n) Yapi Kredi, Yapi Kredi Plaza D Blok, Levent, TR-862 Istanbul, Turkey Regulatory authority: Sermaye Piyasası Kurulu Capital Markets Board of Turkey, Eskişehir Yolu 8.Km No:156, 653 Ankara, Turkey o) UniCredit Tiriac Bank, Ghetarilor Street 23-25, RO-1416 Bucharest 1,Romania Regulatory authority: CNVM, Romanian National Securities Commission, Foişorului street, no.2, sector 3, Bucharest, Romania p) ATFBank, 1 Furmanov Str., KZ-5 Almaty, Kazakhstan Agency of the Republic of Kazakhstan on the state regulation and supervision of financial market and financial organisations, 5, Almaty, 67 Aiteke Bi str., Kazakhstan POTENTIAL CONFLICTS OF INTEREST UniCredit Bank AG acts as a Specialist or Primary Dealer in government bonds issued by the Italian, Portuguese and Greek Treasury. Main tasks of the Specialist are to participate with continuity and efficiency to the governments' securities auctions, to contribute to the efficiency of the secondary market through market making activity and quoting requirements and to contribute to the management of public debt and to the debt issuance policy choices, also through advisory and research activities. ANALYST DECLARATION The author s remuneration has not been, and will not be, geared to the recommendations or views expressed in this study, neither directly nor indirectly. ORGANIZATIONAL AND ADMINISTRATIVE ARRANGEMENTS TO AVOID AND PREVENT CONFLICTS OF INTEREST To prevent or remedy conflicts of interest, UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit CAIB Securities UK Ltd., UniCredit Securities, UniCredit Menkul Değerler A.Ş., UniCredit Bulbank, Zagrebačka banka, UniCredit Bank, Bank Pekao, Yapi Kredi, UniCredit Tiriac Bank, ATFBank have established the organizational arrangements required from a legal and supervisory aspect, adherence to which is monitored by its compliance department. Conflicts of interest arising are managed by legal and physical and non-physical barriers (collectively referred to as Chinese Walls ) designed to restrict the flow of information between one area/department of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit Bank AG Milan Branch, UniCredit CAIB Securities UK Ltd., UniCredit Securities, UniCredit Menkul Değerler A.Ş., UniCredit Bulbank, Zagrebačka banka, UniCredit Bank, Bank Pekao, Yapi Kredi, UniCredit Tiriac Bank, ATFBank and another. In particular, Investment Banking units, including corporate finance, capital market activities, financial advisory and other capital raising activities, are segregated by physical and nonphysical boundaries from Markets Units, as well as the research department. In the case of equities execution by UniCredit Bank AG Milan Branch, other than as a matter of client facilitation or delta hedging of OTC and listed derivative positions, there is no proprietary trading. Disclosure of publicly available conflicts of interest and other material interests is made in the research. Analysts are supervised and managed on a day-to-day basis by line managers who do not have responsibility for Investment Banking activities, including corporate finance activities, or other activities other than the sale of securities to clients. ADDITIONAL REQUIRED DISCLOSURES UNDER THE LAWS AND REGULA- TIONS OF JURISDICTIONS INDICATED Notice to Austrian investors This document does not constitute or form part of any offer for sale or subscription of or solicitation of any offer to buy or subscribe for any securities and neither this document nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever. This document is confidential and is being supplied to you solely for your information and may not be reproduced, redistributed or passed on to any other person or published, in whole or part, for any purpose. Notice to Czech investors This report is intended for clients of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit CAIB Securities UK Ltd. or UniCredit Bank AG Milan Branch in the Czech Republic and may not be used or relied upon by any other person for any purpose. Notice to Italian investors This document is not for distribution to retail clients as defined in article 26, paragraph 1(e) of Regulation n approved by CONSOB on October 29, 27. In the case of a short note, we invite the investors to read the related company report that can be found on UniCredit Research website Notice to Russian investors UniCredit Research page 8

9 May 25, 21 As far as we are aware, not all of the financial instruments referred to in this analysis have been registered under the federal law of the Russian Federation On the Securities Market dated April 22, 1996, as amended, and are not being offered, sold, delivered or advertised in the Russian Federation. Notice to Turkish investors Investment information, comments and recommendations stated herein are not within the scope of investment advisory activities. Investment advisory services are provided in accordance with a contract of engagement on investment advisory services concluded with brokerage houses, portfolio management companies, nondeposit banks and the clients. Comments and recommendations stated herein rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not suit your financial status, risk and return preferences. For this reason, to make an investment decision by relying solely on the information stated here may not result in consequences that meet your expectations. Notice to Investors in Japan This document does not constitute or form part of any offer for sale or subscription for or solicitation of any offer to buy or subscribe for any securities and neither this document nor any part of it shall form the basis of, or be relied on in connection with or act as an inducement to enter into, any contract or commitment whatsoever. Notice to UK investors This communication is directed only at clients of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit CAIB AG, UniCredit CAIB Securities UK Ltd. or UniCredit Bank AG Milan Branch who (i) have professional experience in matters relating to investments or (ii) are persons falling within Article 49(2)(a) to (d) ( high net worth companies, unincorporated associations, etc. ) of the United Kingdom Financial Services and Markets Act 2 (Financial Promotion) Order 25 or (iii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as relevant persons ). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons. Notice to U.S. investors This report is being furnished to U.S. recipients in reliance on Rule 15a-6 ("Rule 15a- 6") under the U.S. Securities Exchange Act of 1934, as amended. Each U.S. recipient of this report represents and agrees, by virtue of its acceptance thereof, that it is such a "major U.S. institutional investor" (as such term is defined in Rule 15a-6) and that it understands the risks involved in executing transactions in such securities. Any U.S. recipient of this report that wishes to discuss or receive additional information regarding any security or issuer mentioned herein, or engage in any transaction to purchase or sell or solicit or offer the purchase or sale of such securities, should contact a registered representative of UniCredit Capital Markets, Inc. ( UCI Capital Markets ). Any transaction by U.S. persons (other than a registered U.S. broker-dealer or bank acting in a broker-dealer capacity) must be effected with or through UCI Capital Markets. The securities referred to in this report may not be registered under the U.S. Securities Act of 1933, as amended, and the issuer of such securities may not be subject to U.S. reporting and/or other requirements. Available information regarding the issuers of such securities may be limited, and such issuers may not be subject to the same auditing and reporting standards as U.S. issuers. The information contained in this report is intended solely for certain "major U.S. institutional investors" and may not be used or relied upon by any other person for any purpose. Such information is provided for informational purposes only and does not constitute a solicitation to buy or an offer to sell any securities under the Securities Act of 1933, as amended, or under any other U.S. federal or state securities laws, rules or regulations. The investment opportunities discussed in this report may be unsuitable for certain investors depending on their specific investment objectives, risk tolerance and financial position. In jurisdictions where UCI Capital Markets is not registered or licensed to trade in securities, commodities or other financial products, transactions may be executed only in accordance with applicable law and legislation, which may vary from jurisdiction to jurisdiction and which may require that a transaction be made in accordance with applicable exemptions from registration or licensing requirements. The information in this publication is based on carefully selected sources believed to be reliable, but UCI Capital Markets does not make any representation with respect to its completeness or accuracy. All opinions expressed herein reflect the author s judgment at the original time of publication, without regard to the date on which you may receive such information, and are subject to change without notice. UCI Capital Markets may have issued other reports that are inconsistent with, and reach different conclusions from, the information presented in this report. These publications reflect the different assumptions, views and analytical methods of the analysts who prepared them. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is provided in relation to future performance. UCI Capital Markets and any company affiliated with it may, with respect to any securities discussed herein: (a) take a long or short position and buy or sell such securities; (b) act as investment and/or commercial bankers for issuers of such securities; (c) act as market makers for such securities; (d) serve on the board of any issuer of such securities; and (e) act as paid consultant or advisor to any issuer. The information contained herein may include forward-looking statements within the meaning of U.S. federal securities laws that are subject to risks and uncertainties. Factors that could cause a company s actual results and financial condition to differ from expectations include, without limitation: political uncertainty, changes in general economic conditions that adversely affect the level of demand for the company s products or services, changes in foreign exchange markets, changes in international and domestic financial markets and in the competitive environment, and other factors relating to the foregoing. All forward-looking statements contained in this report are qualified in their entirety by this cautionary statement This document may not be distributed in Canada or Australia. UniCredit Research page 9

10 May 25, 21 UniCredit Research* Thorsten Weinelt, CFA Global Head of Research & Chief Strategist * UniCredit Research is the joint research department of UniCredit Bank AG (UniCredit Bank), UniCredit CAIB Group (UniCredit CAIB), UniCredit Securities (UniCredit Securities), UniCredit Menkul Değerler A.Ş. (UniCredit Menkul), UniCredit Bulbank, Zagrebačka banka, UniCredit Bank, Bank Pekao, Yapi Kredi, UniCredit Tiriac Bank and ATFBank. Dr. Ingo Heimig Head of Research Operations Economics & FI/FX Research Marco Annunziata, Ph.D., Chief Economist marco.annunziata@unicreditgroup.eu Economics & Commodity Research Global Economics Dr. Davide Stroppa, Global Economist davide.stroppa@unicreditgroup.de European Economics Andreas Rees, Chief German Economist andreas.rees@unicreditgroup.de Marco Valli, Chief Italian Economist marco.valli@unicreditgroup.de Stefan Bruckbauer, Chief Austrian Economist stefan.bruckbauer@unicreditgroup.at Tullia Bucco tullia.bucco@unicreditgroup.de Chiara Corsa chiara.corsa@unicreditgroup.de Dr. Loredana Federico loredana.federico@unicreditgroup.eu Alexander Koch, CFA alexander.koch1@unicreditgroup.de Chiara Silvestre chiara.silvestre@unicreditgroup.de EEMEA Economics & FI/FX Strategy Cevdet Akcay, Ph.D., Chief Economist, Turkey , cevdet.akcay@yapikredi.com.tr Matteo Ferrazzi., Economist, EEMEA , matteo.ferrazzi@unicreditgroup.eu Dmitry Gourov, Economist, EEMEA , dmitry.gourov@caib.unicreditgroup.eu Hans Holzhacker, Chief Economist, Kazakhstan , h.holzhacker@atfbank.kz Anna Kopetz, Economist, Baltics , anna.kopetz@caib.unicreditgroup.eu Marcin Mrowiec, Chief Economist, Poland , marcin.mrowiec@pekao.com.pl Vladimir Osakovsky, Ph.D., Head of Strategy and Research, Russia ext.7558, vladimir.osakovskiy@unicreditgroup.ru Rozália Pál, Ph.D., Chief Economist, Romania , rozalia.pal@unicredit.ro Kristofor Pavlov, Chief Economist, Bulgaria , kristofor.pavlov@unicreditgroup.bg Goran Šaravanja, Chief Economist, Croatia , goran.saravanja@unicreditgroup.zaba.hr Pavel Sobisek, Chief Economist, Czech Republic , pavel.sobisek@unicreditgroup.cz Gyula Toth, Economist/Strategist, EEMEA , gyula.toth@caib.unicreditgroup.eu Jan Toth, Chief Economist, Slovakia , jan.toth@unicreditgroup.sk US Economics Dr. Harm Bandholz, CFA harm.bandholz@us.unicreditgroup.eu Commodity Research Jochen Hitzfeld jochen.hitzfeld@unicreditgroup.de Nikolaus Keis nikolaus.keis@unicreditgroup.de Global FI/FX Strategy Michael Rottmann, Head , michael.rottmann1@unicreditgroup.de Dr. Luca Cazzulani, Deputy Head, FI Strategy , luca.cazzulani@unicreditgroup.de Chiara Cremonesi, FI Strategy , chiara.cremonesi@unicreditgroup.eu Dr. Stephan Maier, FX Strategy , stephan.maier@unicreditgroup.eu Giuseppe Maraffino, FI Strategy , giuseppe.maraffino@unicreditgroup.de Armin Mekelburg, FX Strategy , armin.mekelburg@unicreditgroup.de Roberto Mialich, FX Strategy , roberto.mialich@unicreditgroup.de Kornelius Purps, FI Strategy , kornelius.purps@unicreditgroup.de Herbert Stocker, Technical Analysis , herbert.stocker@unicreditgroup.de Publication Address UniCredit Research Corporate & Investment Banking UniCredit Bank AG Arabellastrasse 12 D Munich Tel Fax Bloomberg UCGR Internet UniCredit Research page 1