Ecuador has announced plans to start increasing its oil output, effectively breaking off its engagement with OPEC in the cartel’s production cut deal. Ecuador is a small producer and it had pledged to cut 26,000 bpd from its oil output, which it never did. It cut about 60% of that, so its daily production currently stands at 545,000 barrels. That’s a bit more than what Saudi Arabia undertook to slash from its daily output to support prices.
The initial announcement by Ecuador’s Oil Minister Carlos Perez struck the market hard, and many worried this would be the end of the deal as other financially strained OPEC members could use the precedent to leave the deal. A day later, however, Perez was quoted by media as saying that Quito would maintain its support for the oil production cut efforts of OPEC and its partners. The Andean country has so far reduced its output by 16,000 bpd, he said, for “tax needs.”
The two statements seem to be contradictory. Perhaps the OPEC leadership had something to say after the first announcement and the implications it might have for other cartel members. Media that covered the announcement noted that this is the first time an OPEC member has publicly declared a rank-breaking move.
So far, no other OPEC members have taken up Ecuador’s example. They will probably wait until the July 24 meeting of the ministerial committee that monitors compliance with the cut, but it seems that there is little…