The Day at a Glance | June 2 2022

The Top

*OPEC+ discusses crude oil production increases; it considers compensating Russia´s lower production levels by increasing supply from other countries.

*Central Bank of Mexico cut its growth estimate to 2.2% in 2022.

*There are fears of an economic contraction in Germany during the 2Q22 due to its dependence on manufacturing activities and production chain disruptions. 

*The FED´s Beige Book shows evidence of an economic slowdown in several of the country´s regions due to higher rates and inflation.

*The number of houses on sale in the United States increased 8% annual, the first recorded increase since June of 2019.

*Consumer confidence in Mexico remains stable during May (44.1).

*China declares victory over COVID-19 outbreak in Shanghai.

Economic environment

OPEC+ discusses production quotas. Since sanctions were implemented on Russia for its invasion of Ukraine, crude oil production declined in around 1 million daily barrels, which has contributed to decreased crude oil supply at a global level and led to an increase in international prices and a tighter oil market. According to recent reports, Saudi Arabia and OPEC+ are considering compensating Russia´s decrease in production in the short term (pressured by the United States). This could ease upwards pressures on oil prices and facilitate President Biden´s fight against inflation – whose current approval ratings are low because of high inflation and seeks concrete actions from US allies, such as Saudi Arabia. In exchange, Biden would offer reopening diplomatic channels with Arab leaders, from whom the US President has remained distant due to issues regarding human rights, supply of weapons, and the war in Yemen. This morning, oil prices have receded in light of the possibility of Russia´s oil production being replaced. According to some sources, the decision could be carried out in OPEC+s monthly meeting today – in which it will define July´s production increase. OPEC+ is expected to maintain its plans to gradually increase production and announce an additional 432 thousand daily barrels increase next month. The final goal is for OPEC+ to have September´s production reach pre-pandemic levels. In this same meeting, the possibility of other countries increasing production to compensate for Russia´s decrease supply could be discussed – something that Russia would have to accept. It´s believed that the only country with enough idle capacity to compensate Russia´s lower production levels is the United Arab Emirates (2mdb e.); apart from this country, there is not enough capacity to compensate Russia´s production, according to experts.