Uni Oil 1.8.11

01 August 2011 Global Economics & FI/FX Research

Commodity Outlook

UniCredit Research page 1 See last pages for disclaimer.

Crude oil will remain expensive in 2012

■ In 2012, global demand for crude oil will increase by 1.5 mb/d to a new record level of 91.02 mb/d. In the third quarter of 2012, demand of emerging markets could for the first time outstrip the demand of industri-alized countries.

■ One underlying problem is the decline in crude oil production in the cur-rently producing fields. The International Energy Agency (IEA) estimates that production will decline from 68 mb/d in 2009 to only 16 mb/d in 2035.

■ Non-OPEC countries can increase production in 2012 by 900 kb/d. How-ever, most of the new capacities comprise expensive alternatives: deep-sea oil fields, oil sand deposits, and natural gas liquids.

■ Because of the Libyan crisis, the free production capacity of OPEC has fallen to only 3.6 mb/d. It will be the second half of 2012 before it recov-ers again to roughly 5 mb/d. But because of the strong crude oil con-sumption growth in the Middle East, we expect only a moderate increase in crude oil exports.

■ Both 2011 and 2012 will see the emergence of a supply gap in the re-spective third quarter that presumably cannot be closed even by OPEC. OECD countries can offset this thanks to high stockpiles.

■ We are raising our forecast for Brent for 2011 from USD 110 to USD 115 and for 2012 from USD 100 to USD 120 per barrel. WTI will remain on average USD 15 cheaper up to the end of 2012. If the gap were to widen even further, this could result in lower production in North America.

CRUDE OIL DEMAND OF EMERGING MARKETS OUTSTRIPS DEMAND OFINDUSTRIALIZED COUNTRIES

25

30

35

40

45

50

55

I/00

IV/0

0III

/01

II/02 I/0

3IV

/03

III/0

4II/

05 I/06

IV/0

6III

/07

II/08 I/0

9IV

/09

III/1

0II/

11 I/12

IV/1

2

mb

/d

OECD demand Demand of Non-OECD countries

Source: IEA, UniCredit Research

Energy

WTI Brent Natural gas

Unit $/Barrel $/Barrel $/MMBTU

current 96.0 116.2 4.3

% 1M 1.22 3.81 -1.92

in 3 M 100.0 120.0 4.5

in 6 M 100.0 115.0 4.5

Ø Q2/11 102.4 116.7 4.4

Ø Q3/11e 100.0 120.0 4.5

Ø 2010 78.9 80.2 4.4

Ø 2011 100.0 115.0 4.5

Ø 2012 105.0 120.0 4.8

Industrial metals

Copper Aluminum

Unit US$/MT US$/MT

current 9830 2597

% 1M 5.47 3.74

in 3 M 9700 2500

in 6 M 9800 2400

Ø Q2/11 9185 2610

Ø Q3/11e 9600 2500

Ø 2010 7510 2164

Ø 2011 9400 2500

Ø 2012 9600 2600

Precious metals

Gold Silver Platinum

Unit $/Ounce cts/Ounce $/Ounce

current 1623.6 3963.0 1779.0

% 1M 7.78 15.24 3.67

in 3 M 1600.0 4000.0 1700.0

in 6 M 1650.0 4100.0 1850.0

Ø Q2/11 1508.0 3854.6 1784.1

Ø Q3/11e 1550.0 3800.0 1800.0

Ø 2010 1200.0 1950.0 1600.0

Ø 2011 1500.0 3500.0 1825.0

Ø 2012 1700.0 3800.0 2000.0

Quelle: Thomson Financial Datastream,UniCredit Research

AuthorJochen Hitzfeld (UniCredit Bank)+49 89 [email protected]

BloombergUCGR

Internetwww.research.unicreditgroup.eu

mailto:[email protected]

http://www.research.unicreditgroup.eu



KEY EVENTS

US Department of Energy 08/03/2011 16:30 US crude oil, gasoline and distillate inventories

International Energy Agency 08/10/2011 Monthly oil market report

Source: UniCredit Research

Strong increase in crude oil demand next year

With its July monthly report, the IEA has for the first time also provided a detailed scenario for supply and demand in 2012 on the crude oil market. Global demand will increase by 1.5 mb/d to 91.02 mb/d. As a result, the increase in demand is even slightly higher than in 2011, where all indications point to an increase of only 1.2 mb/d. For 2012, the IEA also as-sumes global GDP growth of 4.4%, which is in line with both the IMF scenario as well as our own scenario. The central risk factors remain, however, as before the global debt crisis and the economic downswing in China.

IN 2012, THE GROWTH OF CRUDE OIL DEMAND WILL ACCELERATE FURTHER

0.7 0.7

1.6

3.1

1.4

1.0

1.5

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2.8

1.21.5

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

mb

/d

Global oil demand, change vs prev. year


The growth of demand for oil is attributable solely to emerg-ing markets. Here, the demand increases by 1.6 mb/d, while the demand of OECD countries declines slightly by 120 kb/d. In the second quarter of 2012, crude oil demand of emerging markets will even outstrip the demand of the OECD countries for the first time! The estimate for demand in 2011 was also revised upwards again by 200 kb/d because of the strong growth in emerging markets. The largest contribution to growth comes once again from China. In 2012, demand will increase by a further 500 kb/d. This is even slightly less than in 2010 with 1 mb/d and 2011 with 600 kb/d. But the growthin other regions should not be underestimated either. In the remainder of Asia, Latin America and the Middle East, for example, demand increases in each case by 300 kb/d.

FOR THE FIRST TIME, CRUDE OIL DEMAND OF EMERGING MARKETS HIGHER THAN IN INDUSTRIALIZED COUNTRIES

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35

40

45

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55

I/00

IV/0

0III

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II/02 I/0

3IV

/03

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05 I/06

IV/0

6III

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II/08 I/0

9IV

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III/1

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11 I/12

IV/1

2

mb

/d

OECD demand Demand of Non-OECD countries


Increase in non-OPEC production: Expensive and associated with risks

The production of non-OPEC states will increase by 900 kb/d in 2012, compared to an increase of only 500 kb/d this year. The increase is on a par with the excellent years 2009-2010 and 2000-2004, and is the result of sustained investments in the upstream segment in recent years.

2012: STRONG INCREASE IN NON-OPEC PRODUCTION

0.7

1.3

0.9

0.7

-0.2

0.4 0.4

-0.2

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1.1

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0.9

-0.4

-0.2

0.0

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0.4

0.6

0.8

1.0

1.2

1.4

1.6

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

mb

/d

Crude oil production of the Non-OPEC states, change yoy


Much of the growth does, however, come once again from Canadian oil sands, biofuels, and the liquid components of natural gas. All these are only profitable when the oil price is



high. In the past, the growth in non-OPEC production had, in addition, frequently to be revised downwards, since produc-tion in the exhausted fields declined more rapidly than ex-pected. In its long-term scenario up to 2035, the IEA expects a decline in crude oil production of the already producing fields by 8.3% per year. The production declines from 68 mb/d in 2009 to only 16 mb/d in 2035. The need for new ca-pacities is, therefore, substantially higher than the pure in-crease in demand to 99 mb/d by 2035 would suggest. The decline in crude oil production is accelerating over time, since more and more fields are exceeding peak production and the share of the small and "off-shore" fields, where the decline in production is particularly steep, is increasing. The IEA assumes that non-OPEC countries as a whole will reach peak production in 2015. The decline in oil production overall can, however, still be offset until 2025 by an increase in pro-duction from oil sands, "coal-to-liquids" and "gas-to-liquids" processes. Against this backdrop, the assumption of an in-crease in production by non-OPEC states is associated with high risks.

OPEC challenged, particularly in the third quarter

In June, OPEC production increased primarily because of a strong 850 kb/d increase in production in Saudi-Arabia to 30.03 mb/d. Production is, therefore, 5.19 mb/d above the quota of 24.845 mb/d set as far back as 2008. Nevertheless, the production is not enough to cover demand in the sea-sonally strong second half of the year. This would require 31.3 mb/d in the third quarter and 30.6 mb/d in the fourth quarter. Pursuant to the OPEC resolution at the 159th meet-ing in Vienna to leave production and the quotas unchanged, we expect a strong inventory rundown, particularly as the IEA has decided not to release any further oil reserves. The next regular OPEC meeting is not until 14 December 2011.

Assuming non-OPEC states increase production in 2012 as planned by 900 kb/d, then OPEC must on average produce roughly 30.7 mb/d. That is only 0.1 mb/d more than in 2011. The pattern is, however, also the same for 2012: the market is tightest in the third and fourth quarter. In the third quarter of 2011, the gap is 1.4 mb/d; in 3Q/2012 it is even 1.6 mb/d. In the fourth quarter of 2011, the gap will however be closed rapidly, since non-OPEC countries will resume production at a number of facilities after lengthy maintenance work. The situation is different in 2012: Here, there is also a gap in the fourth quarter that is not substantially smaller: 1.4 mb/d.

OPEC CRUDE OIL IN STRONG DEMAND, ABOVE ALL IN THE THIRD QUARTER

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-1.5

-1.0

-0.5

0.0

0.5

1.0

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2.0

I/09II/

09III

/09IV

/09

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10III

/10IV

/10

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2007

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2010

2011

2012

mb

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OPEC crude oil: production minus global demand for OPEC oil

Inventory rundown expected


The free production capacity of OPEC has fallen to only 3.6 mb/d because of the virtually complete disruption of Libyan crude oil production. This underscores once again the central risk for the oil market: an escalation of the crisis in the Middle East to a further important oil producer. At the moment, the free production capacity stands at 33.95 mb/d. In the second half of 2012, the free production capacity is, however, ex-pected to increase again strongly to 35.08 mb/d. First, the production capacity of Libya should have recovered again by then, even though the old production level will probably not be reached again until the end of 2013. In addition, by the end of 2012, Iraq and the United Arab Emirates can then also produce more crude oil.

HIGH CAPTIVE CONSUMPTION REDUCING OPEC EXPORTS

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27

28

29

30

1998 2000 2002 2004 2006 2008 2010

mb

/d

OPEC crude oil exports

Source: BPSR, UniCredit Research

A further problem is the high and growing captive consump-tion of OPEC countries. For 2012, oil consumption is ex-pected to increase by 300 kb/d – the second-highest in-crease after China! This will mean that OPEC has less and



less oil left over for export. While in 2005 29.2 mb/d were still exported, in 2010 the figure was only 27.1 mb/d.

OECD stockpiles create a risk cushion

In June, the industrial stockpiles of OECD countries stood at 2677 mb, which translates into roughly 59 days of current consumption. The level of the stockpiles was probably an important reason behind the OPEC decision not to increase production. In the past, OPEC only increased production once the stockpiles had fallen towards 53 days of consump-tion. In the short term, the stockpiles will probably decline because of the supply deficit in the third quarter. Over the medium term, however, stockpiles are expected to remain high, because the consumption of OECD countries will merely stagnate until the end of 2012. There is no data available on the stockpiles of the non-OECD countries and, therefore, above all for China and India. This explains part of the strong fluctuations in the oil price.

HIGH STOCKPILES OF OECD COUNTRIES AS RISK CUSHION

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47

49

51

53

55

57

59

61

63

65

1995 1997 1999 2001 2003 2005 2007 2009 2011

OECD industrial crude oil and products inventories, in days of demand

Critical value for the OPEC to raise production


WTI remains cheaper than Brent

For many years, the US benchmark for crude oil – WTI –was roughly one USD more expensive than the European benchmark Brent. At the beginning of January 2011, how-ever, WTI broke below the sideways band in place for many years for the first time. The gap has, in the interim, widened to roughly USD 20. The reason for this is an increase in oil production in the US thanks to new drilling techniques and in Canada thanks to the ever stronger development of the oil sand deposits. This oil is transported to the central oil hub in Cushing/Oklahoma. The oil infrastructure there – such as refineries and storage facilities – are, however, at the limits of their capacity. The oil must now be transported at great expense by rail and container truck to the Gulf of Mexico. This situation can only be remedied once the oil infrastruc-ture has been modernized, for example by the construction

of an efficient pipeline. Some market participants therefore believe the spread could even widen to USD 40 per barrel. This in turn could then trigger a massive cutback in North American oil production and, therefore, an increase in the global price level. We expect WTI to remain on average roughly USD 15 p/b cheaper until the end of 2012.

HIGH BRENT-WTI PRICE SPREAD TO PERSIST

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45

01/06 01/07 01/08 01/09 01/10 01/11

mn

ba

rre

ls

-5

0

5

10

15

20

25

US

D p

/b

Inventories in Cushing Brent minus WTI (RS)

Source: Bloomberg, UniCredit Research

Target price for 2011: Brent at 125 USD

In 2012, the strong consumption growth of non-OECD coun-tries results in record demand of 91.02 mb/d. If OPEC does not increase production, a supply deficit must be expected above all in the seasonally strong second quarter. OECD countries can cushion this through high stockpiles. There is, in contrast, no data available on the stockpiles of non-OECD countries. Against this backdrop, the oil price is not expected to decline despite the economic slowdown and the sovereign debt crisis in Europe. We are, therefore, raising our target price for Brent for 2011 from USD 110 to USD 115 and for 2012 from USD 100 to USD 120 per barrel (in each case calendar year average). In this period, we expect a persis-tently wide gap of USD 15 per barrel between WTI and Brent.

Jochen Hitzfeld (UniCredit Bank)+49 89 [email protected]




COMMITMENT OF TRADERS REPORT – NON-COMMERCIAL TRADERS

WTI: STILL VERY HIGH NET LONG POSITION

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01/07 08/07 02/08 09/08 04/09 11/09 06/10 01/11

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D/b

arr

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usa

nd

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WTI (LS) Non-commercial net position (RS)

Source: Bloomberg, CFTC, UniCredit Research

NATURAL GAS: SHORT POSITIONS COULD PROVIDE A BOOST

2.0

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01/07 08/07 02/08 09/08 04/09 11/09 06/10 01/11

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rma

l Un

its

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Natural Gas ( LS) Non-commercial net position (RS)


GOLD: ONCE AGAIN VERY HIGH SPECULATIVE INTEREST

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01/07 08/07 02/08 09/08 04/09 11/09 06/10 01/11

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Gold (LS) Non-commercial net position (RS)


SILVER: GROWING SPECULATIVE INTEREST

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01/07 08/07 02/08 09/08 04/09 11/09 06/10 01/11

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Silver (LS) Non-commercial net position (RS)


COPPER: VERY HIGH NET LONG POSITION

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Copper (LS) Non-commercial net position (RS)


WHEAT: STRONG DECLINE OF NET LONG POSITIONS

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1280

01/07 08/07 02/08 09/08 04/09 11/09 06/10 01/11

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Wheat (LS) Non-commercial net position(RS)




US STOCKPILES

CRUDE OIL

250

270

290

310

330

350

370

390

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

mn

ba

rre

ls

250

270

290

310

330

350

370

390

mn

ba

rre

ls

Average MIN MAX 2011

Source: Bloomberg, DOE, UniCredit Research

GASOLINE

170

180

190

200

210

220

230

240

250


mn

ba

rre

ls

170

180

190

200

210

220

230

240

250

mn

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HEATING OIL

80

100

120

140

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mn

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ba

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NATURAL GAS

0

500

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3,500

4,000


bn

cu

bic

fe

et

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et



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 2011.



GLOBAL OIL PRODUCTION, 2012 FORECAST, OPEC SCENARIO, MN BPD

Change 2012/112011 1Q 12 2Q 12 3Q 12 4Q 12 2012

Volume %

North America 15.24 15.30 15.32 15.37 15.47 15.37 0.13 0.85%

Western Europe 4.19 4.20 4.03 3.91 4.08 4.05 -0.14 -3.34%

OECD Pacific 0.57 0.61 0.63 0.63 0.60 0.62 0.05 8.77%

Total OECD 20.00 20.11 19.98 19.91 20.15 20.04 0.04 0.20%

Other Asia 3.70 3.73 3.73 3.74 3.75 3.74 0.04 1.08%

Latin America 4.92 5.14 5.15 5.22 5.25 5.19 0.27 5.49%

Middle East 1.74 1.82 1.82 1.82 1.82 1.82 0.08 4.60%

Africa 2.66 2.71 2.70 2.70 2.69 2.70 0.04 1.50%

Total DCs 13.02 13.40 13.40 13.48 13.51 13.45 0.43 3.30%

FSU 13.36 13.47 13.43 13.47 13.54 13.48 0.12 0.90%

Other Europe 0.14 0.14 0.15 0.15 0.15 0.15 0.01 7.14%

China 4.23 4.28 4.25 4.26 4.31 4.28 0.05 1.18%

Total "Other" Regions 17.73 17.89 17.83 17.88 18.00 17.91 0.18 1.02%

Total non-OPEC production 50.76 51.41 51.20 51.26 51.65 51.38 0.62 1.22%

Processing gains 2.13 2.19 2.19 2.19 2.19 2.19 0.06 2.82%

Total non-OPEC supply 52.89 53.60 53.39 53.45 53.84 53.57 0.68 1.29%

previous estimate 52.92 53.60 53.39 53.45 53.84 53.57

OPEC NGLs + non-conventional oils 5.30 5.50 5.60 5.70 5.80 5.70 0.40 7.55%

Total OPEC supply 29.40 29.83 28.90 31.34 31.05 30.24 0.84 2.86%

TOTAL OIL SUPPLY 87.59 88.93 87.89 90.49 90.69 89.51 1.92 2.19%

Source: OPEC Monthly Oil Market Report

GLOBAL OIL DEMAND, 2012 FORECAST, OPEC SCENARIO, MN BPD

Change 2012/112011 1Q 12 2Q 12 3Q 12 4Q 12 2012

Volume %

North America 24.06 24.15 23.83 24.52 24.34 24.21 0.15 0.62%

Western Europe 14.38 14.21 13.92 14.62 14.51 14.32 -0.06 -0.42%

OECD Pacific 7.77 8.24 7.23 7.47 7.94 7.72 -0.05 -0.64%

Total OECD 46.21 46.60 44.98 46.61 46.79 46.25 0.04 0.09%

Other Asia 10.37 10.51 10.67 10.48 10.71 10.59 0.22 2.12%

Latin America 6.33 6.32 6.44 6.68 6.60 6.51 0.18 2.84%

Middle East 7.42 7.49 7.48 7.91 7.63 7.63 0.21 2.83%

Africa 3.38 3.46 3.45 3.33 3.51 3.44 0.06 1.78%

Total DCs 27.50 27.78 28.04 28.40 28.45 28.17 0.67 2.44%

FSU 4.22 4.21 4.03 4.47 4.56 4.32 0.10 2.37%

Other Europe 0.67 0.67 0.62 0.68 0.74 0.68 0.01 1.49%

China 9.57 9.67 10.22 10.33 10.15 10.09 0.52 5.43%

Total "Other" Regions 14.46 14.55 14.87 15.48 15.45 15.09 0.63 4.36%

Total World 88.17 88.93 87.89 90.49 90.69 89.51 1.34 1.52%

previous estimate 88.14 88.93 87.89 90.49 90.69 89.51

revision 0.03 0.00 0.00 0.00 0.00 0.00

Source: OPEC Monthly Oil Market Report



COPPER SUPPLY AND DEMAND, ICSG FORECAST 2011-2012, IN 1,000 TONS

Regions Mine Production Refined Production Copper Usage

('000T) 2009 2010 2011 2012 2009 2010 2011 2012 2009 2010 2011 2012

Africa 1,185 1,315 1,428 1,655 672 857 1,082 1,249 306 285 277 303

North America 1,933 1,915 2,173 2,433 1,758 1,690 1,843 1,953 2,048 2,182 2,270 2,355

Latin America 7,034 7,031 7,383 7,617 3,935 3,893 3,997 4,077 502 632 652 675

Asean-10 1,179 1,089 863 844 544 534 567 601 687 748 775 806

Asia ex Asean/CIS 1,504 1,661 1,750 1,904 7,044 7,591 7,930 8,620 10,540 11,054 11,601 12,196

Asia-CIS 519 491 506 532 450 413 468 515 105 96 100 104

EU-25 729 758 790 812 2,510 2,613 2,706 2,778 3,096 3,332 3,429 3,491

Europe Others 774 826 843 857 995 1,053 1,072 1,087 775 856 865 900

Oceania 1,021 1,011 1,097 1,250 445 417 499 509 130 128 132 135

Total 15,878 16,097 16,833 17,904 18,353 19,061 20,164 21,389 18,189 19,313 20,101 20,965

Adjustment for Primary Feed Shortage 0 -169

Allowance for Disruptions -439 -535

World 15,878 16,097 16,833 17,904 18,353 19,061 19,725 20,685 18,189 19,313 20,101 20,965

% change 1.4% 4.6% 6.4% 3.9% 3.5% 4.9% 6.2% 4.1% 4.3%

Refined Production -Usage Balance 164 -252 -376 -280

Source: International Copper Study Group

GOLD SUPPLY AND DEMAND, WORLD GOLD COUNCIL, TONS

2008 2009 2010 % change 2010 vs

2009

Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 % change Q1'11 vs

Q1'10

Supply

Mine production 2410 2590 2689 3.8 620 656 709 704 664 7.0

Net producer hedging -352 -236 -103 -19 19 -56 -47 -10

Total Mine supply 2058 2353 2586 9.9 602 675 653 657 654 8.7

Official sector sales2 232 34 -76 -325.9 -59 -14 -23 20 -129 119.9

Old gold scrap 1316 1695 1646 -2.9 369 444 377 455 348 -5.9

Total Supply 3606 4081 4155 1.8 912 1105 1007 1132 872 -4.4

0 0 0 0 0 0 0 0

Identifiable demand 0 0 0 0 0 0 0 0

Jewellery fabrication 2190 1814 2017 11.2 546 418 541 512 576 5.5

Industrial and dental 439 410 466 13.8 114 116 120 116 114 -0.3

Bar & coin retail investment 636 778 1149 47.8 241 282 302 325 366 52.1

Other retail investment 220 0 0 0 0 0 0 0

Exchange traded funds & simi-lar

321 617 338 -45.2 5 291 39 4 -56 -1289.4

Total identifiable demand 3806 3618 3971 9.7 906 1107 1002 957 1000 10.5

0 0 0 0 0 0 0

Balancing Figure -200 463 185 7 -2 5 175 -128

Source: World Gold Council


UniCredit Research page 9

DisclaimerOur 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 accu-racy 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. Further-more, past performance is not necessarily indicative of future results. In particular, the risks associated with an investment in the financial, money market or investment instru-ment 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 de-termination 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 Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, 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, 80538 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, 60439 Frankfurt, Germany.

b) UniCredit Bank AG London Branch, Moor House, 120 London Wall, London EC2Y 5ET, United Kingdom. Regulatory authority: “BaFin“ – Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany and subject to limited regulation by the Financial Ser-vices 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 10, 20121 Milan, Italy, duly authorized by the Bank of Italy to provide investment services. Regulatory authority: “Bank of Italy”, Via Nazionale 91, 00184 Roma, Italy and Bundesanstalt für Finanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany.

d) UniCredit Bank AG Vienna Branch, Julius-Tandler-Platz 3, 1090 Vienna, AustriaRegulatory authority: Finanzmarktaufsichtsbehörde (FMA), Otto-Wagner-Platz 5, 1090 Vienna, Austria and subject to limited regulation by the “BaFin“ – Bundesanstalt für Fi-nanzdienstleistungsaufsicht, Lurgiallee 12, 60439 Frankfurt, Germany. Details about the extent of our regulation by the Bundesanstalt für Finanzdienstleistungsaufsicht are avail-able from us on request.

e) UniCredit Securities, Boulevard Ring Office Building, 17/1 Chistoprudni Boulevard, Moscow 101000, RussiaRegulatory authority: Federal Service on Financial Markets, 9 Leninsky prospekt, Moscow 119991, Russia

f) UniCredit Menkul Değerler A.Ş., Büyükdere Cad. No. 195, Büyükdere Plaza Kat. 5, 34394 Levent, Istanbul, TurkeyRegulatory authority: Sermaye Piyasası Kurulu – Capital Markets Board of Turkey, Eskişehir Yolu 8.Km No:156, 06530 Ankara, Turkey

g) UniCredit Bulbank, Sveta Nedelya Sq. 7, BG-1000 Sofia, BulgariaRegulatory authority: Financial Supervision Commission (FSC), 33 Shar Planina str.,1303 Sofia, Bulgaria

h) Zagrebačka banka, Paromlinska 2, HR-10000 Zagreb, CroatiaRegulatory authority: Croatian Agency for Supervision of Financial Services, Miramarska 24B, 10000 Zagreb, Croatia

i) UniCredit Bank, Na Príkope 858/20, CZ-11121 Prague, Czech RepublicRegulatory authority: CNB Czech National Bank, Na Příkopě 28, 115 03 Praha 1, Czech Republic

j) Bank Pekao, ul. Grzybowska 53/57, PL-00-950 Warsaw, PolandRegulatory authority: Polish Financial Supervision Authority, Plac Powstańców Warszawy 1, 00-950 Warsaw, Poland

k) UniCredit Bank, Prechistenskaya emb. 9, RF-19034 Moscow, RussiaRegulatory authority: Federal Service on Financial Markets, 9 Leninsky prospekt, Moscow 119991, Russia

l) UniCredit Bank, Šancova 1/A, SK-813 33 Bratislava, SlovakiaRegulatory authority: National Bank of Slovakia, Stefanikovo nam. 10/19, 967 01 Kremnica, Slovakia

m) Yapi Kredi, Yapi Kredi Plaza D Blok, Levent, TR-80620 Istanbul, TurkeyRegulatory authority: Sermaye Piyasası Kurulu – Capital Markets Board of Turkey, Eskişehir Yolu 8.Km No:156, 06530 Ankara, Turkey

n) UniCredit Tiriac Bank, Ghetarilor Street 23-25, RO-014106 Bucharest 1,RomaniaRegulatory authority: CNVM, Romanian National Securities Commission, Foişorului street, no.2, sector 3, Bucharest, Romania

o) ATFBank, 100 Furmanov Str., KZ-050000 Almaty, KazakhstanAgency of the Republic of Kazakhstan on the state regulation and supervision of financial market and financial organisations, 050000, 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 partici-pate 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 Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, 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 Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, 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 non-physical 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 re-search. 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 fi-nance activities, or other activities other than the sale of securities to clients.



ADDITIONAL REQUIRED DISCLOSURES UNDER THE LAWS AND REGULATIONS OF JURISDICTIONS INDICATED

Notice to Australian investorsThis publication is intended for wholesale clients in Australia subject to the following: UniCredit Bank AG (UCB AG) and its branches do not hold an Australian Financial Services licence but are exempt from the requirement to hold a licence under the Act in re-spect of the financial services to wholesale clients. UCB AG and its branches are regulated by BaFin under German laws, which differ from Australian laws. This document is only for distribution to wholesale clients as defined in Section 761G of the Corporations Act. UCB AG and its branches are not Authorised Deposit Taking Institutions under the Banking Act 1959 and are not authorised to conduct a banking business in Australia.

Notice to Austrian investorsThis 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 investorsThis report is intended for clients of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit Se-curities, UniCredit Menkul Değerler A.Ş., UniCredit Bulbank, Zagrebačka banka, UniCredit Bank, Bank Pekao, Yapi Kredi, UniCredit Tiriac Bank, ATFBank in the Czech Republic and may not be used or relied upon by any other person for any purpose.

Notice to Italian investorsThis document is not for distribution to retail clients as defined in article 26, paragraph 1(e) of Regulation n. 16190 approved by CONSOB on October 29, 2007. 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 www.research.unicreditgroup.eu.

Notice to Japanese investorsThis 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 documentnor 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 Polish investorsThis document is intended solely for professional clients as defined in Art. 3 39b of the Trading in Financial Instruments Act of 29 July 2005.The publisher and distributor of the recommendation certifies that it has acted with due care and diligence in preparing the recommendation, however, assumes no liability for its completeness and accuracy.

Notice to Russian investorsAs 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 22 April 1996, as amended (the "Law"), and are not being offered, sold, delivered or advertised in the Russian Federation. This analysis is intended for qualified investors, as defined by the Law, and shall not be distributed or disseminated to a general public and to any person, who is not a qualified investor.

Notice to Turkish investorsInvestment 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, non-deposit 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 UK investorsThis communication is directed only at clients of UniCredit Bank AG, UniCredit Bank AG London Branch, UniCredit Bank AG Vienna Branch, UniCredit Bank AG Milan Branch, UniCredit Securities, UniCredit Menkul Değerler A.Ş., UniCredit Bulbank, Zagrebačka banka, UniCredit Bank, Bank Pekao, Yapi Kredi, UniCredit Tiriac Bank, ATFBank in the Czech Republic 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, unin-corporated associations, etc.”) of the United Kingdom Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 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 per-sons. 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. investorsThis 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, LLC (“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 inves-tors 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 juris-diction 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 condi-tions 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.

http://www.research.unicreditgroup.eu.



UniCredit Research*

Thorsten Weinelt, CFAGlobal Head of Research & Chief Strategist +49 89 [email protected]

Dr. Ingo HeimigHead of Research Operations +49 89 [email protected]

Economics & FI/FX Research

Economics & Commodity Research

European Economics

Marco Valli, Chief Eurozone Economist+39 02 [email protected]

Andreas Rees, Chief German Economist+49 89 [email protected]

Stefan Bruckbauer, Chief Austrian Economist+43 50505 [email protected]

Tullia Bucco +39 02 [email protected]

Chiara Corsa+39 02 [email protected]

Dr. Loredana Federico +39 02 [email protected]

Mauro Giorgio Marrano +39 02 [email protected]

Alexander Koch, CFA+49 89 [email protected]

Chiara [email protected]

US Economics

Dr. Harm Bandholz, CFA, Chief US Economist+1 212 672 [email protected]

Commodity Research

Jochen Hitzfeld+49 89 [email protected]

Nikolaus Keis+49 89 [email protected]

EEMEA Economics & FI/FX StrategyGillian Edgeworth, Chief EEMEA Economist+44 0207 826 1772, [email protected]

Gyula Toth, Head of EEMEA FI/FX Strategy+43 50505 823-62, [email protected]

Güldem Atabay, Economist, Turkey+90 212 385 9551, [email protected]

Dmitry Gourov, Economist, EEMEA+43 50505 823-64, [email protected]

Hans Holzhacker, Chief Economist, Kazakhstan+7 727 244-1463, [email protected]

Marcin Mrowiec, Chief Economist, Poland+48 22 656-0678, [email protected]

Rozália Pál, Ph.D., Chief Economist, Romania+40 21 203-2376, [email protected]

Kristofor Pavlov, Chief Economist, Bulgaria+359 2 9269-390, [email protected]

Goran Šaravanja, Chief Economist, Croatia+385 1 6006-678, [email protected]

Pavel Sobisek, Chief Economist, Czech Republic+420 2 211-12504, [email protected]

Dmitry Veselov, Ph.D., Economist, EEMEA+44 207 826 1808, [email protected]

Vladimír Zlacký, Chief Economist, Slovakia +421 2 4950-2267, [email protected]

Global FI/FX StrategyMichael Rottmann, Head+49 89 378-15121, [email protected]

Dr. Luca Cazzulani, Deputy Head, FI Strategy+39 02 8862-0640, [email protected]

Chiara Cremonesi, FI Strategy+44 20 7826-1771, [email protected]

Elia Lattuga, FI Strategy+39 02 8862-2027, [email protected]

Armin Mekelburg, FX Strategy+49 89 378-14307, [email protected]

Roberto Mialich, FX Strategy+39 02 8862-0658, [email protected]

Kornelius Purps, FI Strategy+49 89 378-12753, [email protected]

Herbert Stocker, Technical Analysis+49 89 378-14305, [email protected]

Publication Address

UniCredit ResearchCorporate & Investment BankingUniCredit Bank AGArabellastrasse 12 D-81925 MunichTel. +49 89 378-18927Fax +49 89 378-18352

BloombergUCGR

Internetwww.research.unicreditgroup.eu

*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.



































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