One month after abandoning the OPEC production cut deal and shaking the alliance, Ecuador said this week that it was planning to cap its crude oil production at the current level of 541,000 bpd so as to not undermine the cartel’s cuts too much.
In the middle of July, Ecuador’s Oil Minister Carlos Perez said that his country was pulling out of the deal and would gradually raise output because it needed oil revenues to fund government coffers.
Since oil prices failed to rise as much as OPEC and analysts had expected at the start of the deal, budget revenues from lower oil output in the lower-for-longer prices had not helped Ecuador’s economy.
Ecuador is OPEC’s third-smallest producer in terms of volume, and its compliance or non-compliance with the cuts is not the straw that will break the camel’s back.
Although Ecuador’s withdrawal from the deal would not matter much in terms of barrels off the market—with the pledge to cut 26,000 bpd and cap at 522,000 bpd—the pull-out was seen as the first material sign that the resolve within OPEC to stick to the cuts is waning.
Now, one month after the announcement of withdrawal from the deal, Minister Perez said this week that “Even though there is greater potential, we have a commitment with OPEC to maintain this production until there are new guidelines,” as quoted by Bloomberg.
According to Bloomberg, Khalid Al-Falih, the energy minister of OPEC’s de facto leader Saudi Arabia, phoned Perez last month after Ecuador said it wanted out of the agreement.
Last year, Ecuador’s crude oil production averaged 549,000 bpd.
Since the beginning of this year, Ecuador has failed to cap at the level it had pledged with the deal, as per OPEC secondary sources. Output in July—when the country said it was no longer restraining production–rose to 536,000 bpd from 528,000 bpd in June, OPEC figures show.
The country’s current output level is close to its capacity, but is less than the 560,000-bpd record output last seen back in 2014.
By Tsvetana Paraskova for Oilprice.com