The Day at a Glance | July 6 2021

The Top

*OPEC+ suspends negotiations without reaching an agreement on production increases.

*Retail sales in Europe increased more than expected (4.6% monthly; 9% annual).

*PEMEX will run major oil find, Zama, the largest oil discovery by a private company in 70 years, according to SENER.

*China will increase supervision on local companies listed abroad.

Economic environment

OPEC+ failed to reach an agreement on production. Yesterday, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced that it did not reach an agreement on production and abandoned negotiations; there is no scheduled date to resume negotiations. The United Arab Emirates demanded its production quota to be re-calculated in order for it to be allowed to produce 600 thousand additional daily barrels compared to what was originally agreed on if production controls would extend to 2022. However, Saudi Arabia is against this change as it fears that other countries will demand similar changes to be made. Without an agreement, the limits on production will be maintained at 5.8 million daily barrels, which were stipulated in the prior agreement and will not increase in 2 million daily barrels in the second half of the year, something that will put upwards pressure on crude oil prices. The WTI reached 77 dollars per barrel in the early hours and a persistent rise in energy prices could reinforce inflationary fears at a global level. Nevertheless, the lack of agreement could take some countries to leave the pact regarding production cuts, which could lead oil prices to collapse, such as in 2020 after disagreements were had between Russia and Saudi Arabia. Uncertainty will without a doubt magnify volatility in oil prices.