OPEC+ reaches agreement
Over the weekend, the Organization of Petroleum Exporting Countries and its allies (OPEC+) agreed to extend the 9.6 million daily barrels cut in production until the end of July. Nigeria and Iraq, countries that did not meet their production cut targets, must now contribute greater cuts in the following months while Mexico is excluded from carrying out cutbacks beyond June; its government can continue its energy strategy. The next meeting to review the different countries` progress is on June 18th. The most recent figures showed an 89% compliance to the planned cuts – or 1.1 million daily barrels under the established goal. The WTI reached $40 dpb when markets opened but the price has dropped since.
Mexico takes out loan from the World Bank
The international organization approved a 1 billion dollar loan for Mexico`s government in order for it to fund development policies. According to a statement made by the Treasury and Public Credit, the loan will not fund an economic response to COVID-19 nor is it additional to the debt ceiling approved by Congress last year. It is rather a loan that had previously been considered. According to Gabriel Yorio, Deputy Finance Minister, the credit will be exercised starting in the second semester of 2020 and was requested in mid-May. The credit will help fund a financial inclusion program for young people between 15 and 17 and the government will have to hand in information on the progress of said program. Yorio affirmed in an interview with The Economist that “…regarding public policies, there is no condition or obligation for the Mexican government related to this loan”.
Figures in China and Germany not very positive
Import and export figures in China during May showed contractions, reigniting concerns about a recovery in the world`s second largest economy. Exports contracted an annual (-) 3.3% (7% e.) after expanding (3.5%) in April while imports (-16.7%, -14.2% prev.) recorded their first contraction in 4 years, a sign of persistent weakness regarding domestic demand. The contraction in exports was less than estimated, but leading indicators suggest a contraction in export orders. The extraordinary high number of medical equipment exported improved the sector`s figures, even though traditional industries remain weak. In Germany, industrial production fell 17.8% in April, exceeding analysts` estimates and reaching new all-time lows. According to recent surveys, close to 50% of factories have delayed investment projects and 28% of them have cancelled them. However, the German Ministry of Economy is still optimistic about a recovery as a revival in the automotive sector has already begun.