GLOBAL – Ecuador one of the smallest oil producers has said that it would exit the Organisation of the Petroleum Exporting Countries (OPEC) in January next year.
The Resources Ministry of the South American country said that the decision to leave was rooted in the issues and internal challenges that the country needed to bear for it to secure fiscal sustainability.
Ecuador, however added however that it would continue to support all efforts that seek to stabilise the world oil market.
Oil prices which used to have a predictable swing have now changed and are increasingly unpredictable.
Although unpredictable, the general trend has been a fall in prices thanks to a number of factors most significant of these being the ramping up of oil production by the US that have resulted in global oversupply and a slowing global economy.
To respond to the increased unpredictability in oil prices, OPEC which accounts for over 40% of global oil supply, has since 2017 embarked on a production cut.
The latest production cut was in June 2019 where OPEC agreed to reduce production by 1.7million barrels of oil per day.
The development is coming at a time, when OPEC Secretary-General, Mohammad Barkindo, invited all 97 oil producing countries in the world to join the OPEC/non-OPEC alliance, stressing that increased cooperation remained the best recipe for overcoming intensified uncertainties and heightened volatility in the global oil market.
Some analysts had predicted that the move shows that Ecuador was ready to increase exploration and production activities since the country was restricted to maintain oil production below 508,000 b/d in the first six months of 2019 under the OPEC cut agreement compared with a maximum quota of 524,000 b/d in 2018.
Production had indeed affected the country’s 2019 budget estimates, which pegged production at 564,000 b/d, and supports the country’s move to increase production by about nine per cent.
This is the second time Ecuador is exiting OPEC having initially left in 1992 only to re-join again in 2007.
Ecuador joins Indonesia and Qatar who had already terminated their memberships in 2016 and 2019 respectively. .
PricewaterhouseCoopers’s Associate Director, Energy, Utilities & Resources, Habeeb Jaiyeola, noted that the withdrawal of member countries at a time when OPEC looks to stabilise the market sends a worrisome signal.
According to him, OPEC may need to re-jig, especially bringing the members closer to ensure projected objectives were achieved.