The Day at a Glance | May 5 2022
*No surprises regarding OPEC+: It will increase production in 432 thousand daily barrels in June.
*Ukraine wants EU sanctions to include a total embargo on Russian energy.
*The Bank of England increased the interest rate (1%) and expects a recession in 2023 as inflation could reach double digits.
*Package to fight inflation and shortages will cost around 1.4% of GDP, assured Juan Pablo de Bottom, Undersecretary of Expenditure of the Ministry of Finance and Public Credit (SHCP).
*Mexico´s Industrial Chamber Confederation expects the anti-inflationary plan (announced yesterday) to kick in as soon as a week from now.
*Small and medium sized businesses in China´s services sector are the most affected by confinement measures; activity receded to its lowest level in 2 years.
*The dollar weakened after the FED revealed that it´s not considering a 75bp increase.
*US economic productivity decreased more than expected in the 1Q22 (-7.5% q/q vs -5.4%e.).
OPEC+ maintains production plans. After its meeting this morning, the Organization of Petroleum Exporting Countries and its allies (OPEC+) decided to maintain stipulated global production with a 432 thousand daily barrel increase in June. The increase is considered modest given the rise of the commodity´s price since 2021 in light of insufficient supply, growing demand and disruptions in the market due to the conflict in Ukraine. OPEC+ assured that quarantine measures in China threaten the demand for energy, which is why the increase should be carried out gradually. The West has called on the organization to speed up production increases since the commodity is set above 100 dollars per barrel since late February, but OPEC+ has denied said request. Overall, the organization has intentionally avoided commenting on Russian sanctions, especially those that were discussed in Europe yesterday – regarding an embargo on Russian oil. It´s feared that the embargo may force Russia to redirect its supply to Asia and considerably decrease production, while Europe would have to look for alternatives; this could put more pressure on international crude oil prices. Saudi Arabia and the United Arab Emirates have idle capacity, but not enough to fill in Russia´s supply in case the sanctions are implemented.