Hello, dear participants of the WellMax international system, clients, partners and investors of International Financial Community!

We continue keeping you informed on the results of our activities, and the IFC specialists’ take on the situation and processes in global and regional economies.

Over the period from the 10^th of February to the 10^th of March, the assets value of the WellMax Premium investment portfolio increased by 22.32% in US dollars.

The increase in the value of assets of WellMax Premium portfolio in the past month was due to successful operations in the natural gas market in the United States. As we forecasted in our January report, the weather prevailing in February, warmer than usual, in the continental US led to a decrease in the demand for gas for heating needs, which in turn affected the quotes of "blue fuel". So, from February 10 to February 21, 2017, the price of an April futures contract fell from 3,118 USD per million British thermal units to 2,691 USD  per million British thermal units, as shown in the chart below.

At the same time, from the 10^th of February to 25^th of February 25 the value of WellMax Premium investment portfolio assets has shown the maximum increase over the past month: + 37.19%.

At the time of writing this economic review, we have closed  most of the positions in the stock exchange index DGAZ note, which was used as a tool for investing in natural gas, as the winter heating season is nearing his completion, which may lead to a temporary decline in volatility in the gas market and the gradual exhaustion of the potential for a further drop in prices.

In view of this, we conducted a large-scale analysis of the current situation for selecting promising investment markets. One of such markets, in the opinion of our analysts, is the cocoa market, situation on which we have been following closely in recent time.

The price of cocoa on the stock has fallen by almost 40% for the last six months: from 3113 USD per ton on August 18, 2016 to 1,898 USD per ton on March 9, 2017. The reason for such a rapid drop in quotations was a significant improvement in forecasts for the cocoa crop in the 2016/17 marketing season and the expectation of a surplus for the season in the range of 150-250 thousand tons.  According to the later forecasts of the International Cocoa Organization, the surplus in the market may amount to 264 thousand tons.

Additional pressure on the price in early 2017 was provided by data on the volume of processing of cocoa beans in the two largest markets - European and North American. According to the European Cocoa Association, the processing of cocoa beans in Europe in 4th quarter of 2016 has decreased by 0.9% yoy. In the same period, according to the National Confectioners Association, the volume of processing in North America fell by 1.1% yoy. Most market participants expected a small increase in the volume of processing, but not fall. This, along with expectations for an increase in supply surplus this year, led to a drop in the cost of cocoa beans in world markets.

At the same time, the price that has fallen to the lowest since 2008, in our opinion, has good prospects for a significant upward correction. The reason for the correction may be the probable problems with the next 2017/18 season's crop  from the world's largest producer of cocoa beans - Côte d'Ivoire. Its farmers have faced difficulties in selling their crops, without the proceeds from which they will not be able to buy the necessary fertilizers and pesticides for their plantations and prepare for the next season, starting in October.

In the past month we saw the significant price movements in the oil market, which  predicted by us in the previous economic review. On the 8th of March, the price of Brent crude oil fell by more than 5% from 55.92 USD per barrel to 53.11 USD per barrel during just one trading day, breaking sharply the lower boundary of the tightened price corridor. Over the next four trading days, oil continued its decline, reaching the level of 50.92 USD per barrel, the lowest level since late November of 2016.

The reason for such a rapid decline in oil prices, in the first place, was the publication of the  data on oil reserves in the US by US Department of Energy, according to which commercial oil reserves rose from the 24th of February to the 3rd of March by 8.2 million barrels, which not only was a new historical record, but also significantly exceeded the expectations of analysts who predicted an increase in reserve by 1.7-2.0 million barrels. Below you can see a figure that shows the growth of commercial reserve in the US.

Continuing increase in oil production in the US has also put pressure on the price of oil, which at the current prices for "black gold" is most likely to continue.

Skepticism of market participants regarding OPEC compliance with agreements on production reduction also exacerbate negative impact on oil quotes. The methodology for calculating the degree of compliance with the agreement, in particular, also raise questions. So, at the end of February/beginning of March, the leading world mass media circulated a message that OPEC countries, according to Reuters calculations (presented below), fulfilled an agreement on cutting production by 94% in February. At the same time, several important details were missed in the media.

According to the official text of the OPEC agreement, since January 2017, cartel members' production had to be cut by 1.2 million barrels per day to 32.5 million barrels per day. Since December 1, 2016, the organization left Indonesia, the target reduction was revised to 31.749 million barrels per day.

Despite the fact that Libya and Nigeria were freed from the burden of cuts due to a drop in production caused by wars and political upheaval in both countries, the target level of 31.749 million barrels per day takes into account the combined production of all 13 members of the organization (including Libya and Nigeria ).

At the same time, 94% mark takes into consideration only 11 members of the organization, while taking into account all 13 members will lead to only 71% mark, since to implement the agreement it is necessary to reduce the additional 441 thousand barrels per day.

It should also be noted that the final figures of targeted indicator in Reuters report , from which the degree of compliance with the agreement is calculated, does not take into account the increase in the production quota for Iran (with the footnote that Iran's quota on the basis of later agreements has been increased).

At the same time, the difference between the old and new quotas is 268 thousand barrels per day. If you add this difference to the required reductions from the Reuters report, the compliance rate will be only 76.7% (excluding Libya and Nigeria).

In addition, it should be noted that after 2 months after the entry into force of the agreement (1/3 of the term of the agreements), 5 members of the cartel did not make serious cuts:

• Venezuela - 7%;

• Algeria - 18%;

• Gabon - 22%;

• United Arab Emirates - 24%;

• Iraq - 48%.

In addition, only two OPEC members have implemented an agreement to reduce production by 100% or more - Angola (117%) and Saudi Arabia (153%), which accounts for the bulk of the cuts. At the same time, the experts of the International Energy Agency assess the extent to which the agreement was complied with by 11 countries that are not members of the OPEC, only by 37%.

Against the backdrop of growing oil production in the US and other countries that are not involved in the reduction agreement, compliance by OPEC member countries is a concern, which has a negative impact on oil quotes. OPEC's "verbal intervention" may not be enough to keep prices at relatively high levels, and we do not exclude a possible price cut below the psychologically important mark of 50 USD per barrel of Brent oil if current market trends continue.

Negative price dynamics in the oil market affected the Russian national currency accordingly. However, just a few days after the fall, the ruble strengthened even despite the decision taken on the 15th of March at a meeting of the Federal Open Market Committee of the US Federal Reserve to raise the key rate by 0.25 percentage points to a range of 0.75% -1%. The main reason for the relatively high exchange rate of the national currency is the inflow of funds from foreign investors who trade on the "carry trade" principle. The "carry trade" strategy is to borrow funds in the national currency of the state, which established low interest rates, converting and investing them in the national currency of states that have established high interest rates.

However, it should be noted that ruble assets are of interest to investors only with a significant difference in interest rates for rubles and dollars. Considering the fact of what is expecting us this year, most likely, at least two rate increases by the US Federal Reserve, the outflow of funds from ruble assets in the long term may intensify, which will have an appropriate impact on the ruble exchange rate. In the short term, some support for the Russian national currency is likely to be provided by the approximation of the tax period and the corresponding sale by its major exporting companies of its foreign exchange earnings.

At the moment, the strengthening of the ruble above the level of 56.5 rubles per dollar seems unlikely to us, as it will have a negative impact on the revenue of export-oriented companies in Russia who need a cheap ruble to maintain a low level of costs, increasing their competitiveness in the international market. In addition, due to the cheap ruble, the government has the ability to keep the budget deficit at a relatively low level. Thus, further strengthening of the national currency could negatively affect the entire Russian economy, which the authorities cannot allow in the pre-election year.

At the same time, maintaining a large spread between the key rates in the US and Russia causes the continued interest in ruble assets and bonds from foreign investors, which excludes a sharp weakening of the national currency. In case the current key rate of Russia remains unchanged at the next meeting of the Bank of Russia scheduled for the 24th of March, the ruble is likely to gain a foothold at current levels in the range of 56.5-59 rubles for the US dollar.

Meanwhile, in the US, uncertainty about future directions of US domestic and foreign policy remains. Despite the fact that the cabinet of the new US president is almost completely formed (only the portfolios of the ministers of agriculture and labor remain unassigned), and two months have passed since his inauguration, at the moment we have only a number of controversial decrees and vivid statements with complete absence of a clear vector in the actions of the new administration, which negatively affects the mood of investors around the world. We assume that sharp reduction of the news items about President Trump in Russian television was partly caused by this uncertainty.

In Britain, in turn, the process of withdrawal from the EU is intensified, the law of which was recently finally approved by both chambers of the British Parliament and signed by Queen Elizabeth II. The course of negotiations on withdrawal between Britain and the EU will undoubtedly influence European markets, which may be subject to increased volatility as the presidential elections in France approach the elections, at which the future of not only the French, but possibly the entire European Union, will be decided.

Thus, ahead of us is a very turbulent and informative period ahead. For us and our clients, this opens up additional opportunities, because the ability to analyze news flows and the ability to quickly make investment decisions have been and remain strong points of the team of International Financial Community.