Ecuador voted with other Organization of Petroleum Exporting Countries (OPEC) Friday to reduce oil production. OPEC members and 10 oil-producing allies, including Russia, agreed to a 1.2 million barrel-per-day reduction in hopes of stabilizing the oil market.
Oil prices have dropped by 30 percent in recent weeks but have rebounded somewhat since Tuesday. Following OPEC’s production-cut announcement, the benchmark price of Brent crude rose 2.7 percent to $61.76 per barrel.
Under the new agreement, Ecuador will be allowed to produce 511,000 barrels of oil per day, down slightly from its current level of 515,000. “The impact on our production will be minimal since we are pumping less than the 524,000 barrels we are allowed under the previous OPEC agreement,” says Ecuador Energy Minister Carlos Pérez who attended the meeting in Vienna, Austria. “The cut of about 4,000 barrels will have minimal impact for us.”
Income from oil is a major contributor to Ecuador’s economy, representing 5.9 percent of the country’s GDP.
OPEC will reevaluate production levels in April 2019, according to cartel chair Tafal al Nasr. “If prices do not show significant recovery, we are prepared to make further reductions,” he added.
Several participants at the meeting said they are optimistic that the new production levels will boost oil prices. “There are many factors that determine prices, including some that are out of our control,” Nasr said. One of those factors is increased shale oil production in the U.S. and Canada. “The good news is that production costs are high for the North American oil. They need a price of about $75 per barrel to be profitable and, at the moment, they are pumping at a loss. The market has a way of correcting itself.”
In a news conference following Friday’s meeting, Nasr and other OPEC representatives said that pressure from U.S. President Donald Trump had no affect on their decision. “The opinion of the U.S. has little influence on our decisions,” Nasr said. “Our primary concern is market viability and the U.S. has waning influence on our actions.”