The Day at a Glance | January 18 2022

The Top

*Oil prices reach their highest level in 7 years.

*The People`s Bank of China committed itself to carry out stimulus in order to avoid a collapse in credit.

*Central Bank of Japan increased its inflationary estimates, but discarded monetary normalization actions.

*Investor confidence improves in the German economy at the start of 2022 (ZEW 51.7 vs 32e.).

*China detects Omicron cases in Pekin, Shanghai and Guangdong; these three cities represent one fifth of the country`s economy.

Economic environment

Oil prices rise. International oil prices increased to their highest levels since 2014 this morning with the Brent exceeding 87 dollars per barrel, and the WTI above 85 dpb. The increase responds to a rise in geopolitical tensions in the Middle East, which could hinder supply. Concerns about supply have increased after attacks were carried out by the Houthi group from Yemen on facilities property of the Arab Emirates National Oil Company. The U.A.E. announced that they reserve their right to respond to these attacks, while the company announced that it has implemented contingency plans to ensure the delivery of products to local and international clients. Iran backing the Houthi and Saudi Arabia supporting the U.A.E. reveals the wide range that this conflict has in the region, and instability could affect the supply of crude oil. Among markets, doubts have been raised concerning OPEC+s ability to meet its production goals as several of its member countries are going through underinvestment in production and plant closures. OPEC+ will make its monthly report public after noon today. In this environment – and while demand for oil recovers at a global level – limits on supply are expected to lead to scarcity and an imbalance between supply and demand, which puts upwards pressure on prices. Additionally, the increase in energy prices contributes to a global inflationary context.