OIL MARKET REVIEW AND A FORECAST FOR LIGHT SWEET CRUDE OIL, MARCH 17-21, 2014

Price of Light Sweet Crude oil was going down the whole week. It started week above $102.00 and got to $97.00/barrel by Wednesday.

A few factors affected correction of the oil prices.

First factor is the end of the heating season in the USA. This winter appeared to be the coldest one in last 20 years. Distillates that are used to heat houses were in high demand. Once winter will finally end, the demand will decrease, which will lead to the oil price decrease.

March-May is usually a low season for the oil quotations. The demand will start growing by the end of May, when the auto season, which indicates the increase of gas consumption, will start in the US.

Last EIA reports provided mixed information for WTI. On one hand, the stock of gas has decreased by 5.230 million barrels, which surpassed experts? expectations (the forecasted number was 2.033 million barrels). On the other hand, the stock of the raw oil has grown by the record amount of 6.180 million barrels, while experts were looking for 2.150 million growth.

Second factor affecting the WTI price is the intention of the US Department of Energy to sell part of the strategic oil reserve for the first time since 90?s.

It became known yesterday, that the USA wants to make a test oil sale of 5 million barrels from its strategic reserve, which is a quarter of daily consumption in the US.

By the end of 2013, the volume of strategic reserve was ~700 million barrels.

Last time the test sale like that took place in 1990, when Iraq invaded Kuwait, and the Persian Gulf War started. 3.9 million barrels were sold then.

The official version that explains test sale is meeting growing demand of the local oil-processing plants coming out of annual maintenance cycles, as well as testing the US capabilities in case world oil market gets disrupted.

The representative of the US Department of Energy said that sale of the part of the strategic oil reserve has been scheduled before and is not related to the situation in Ukraine. However, experts think that US government is trying to exert pressure on Russia.

The previous Chairman of the Federal Reserve, Mr. Alan Greenspan, said in his recent interview "I don't see that we have the capability of preventing it [Russian actions] — except, if we can affect their financial system significantly that it creates deterioration within Russia."

The announcement of the US government of the intention to conduct a test sale led to the decrease of the oil price by over a $1.

If the volume of oil sold from the US strategic reserve gets higher, it will plummet oil quotations.

Oil dynamics will be also affected by other geopolitical events. The recovery of the oil export from Iran is one of the risk factors. Iranian government plans to increase volume of oil extraction to 4 million barrels a day (current volume is 1.2-2.2 million barrels).

Oil looks locally oversold from the technical point of view. Technical indicators give a signal to buy. Nearest rollback targets are located at $98.25, $99.20, $100.200 and $101.50.

If $97/barrel is breached down, then oil can continue decreasing to $95.80 and $95.00.



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This information is an analytical review of Capital and FX markets. The material presented, and the information contained, is investment research and should in no way be considered as the provision of investment advice for the purposes of Investment Firms Law 144(I)/2007 of the Republic of Cyprus, or any other form of personal advice, which relates to certain types of transactions, with certain types of financial instruments.

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