OPEC Deal Splinters: Ecuador Will No Longer Comply With Production Quota Due To "Difficult Economic Situation"

Tyler Durden's picture

Ever since the OPEC production cut deal was announced last year in Vienna, there have been two key wildcards fascinating the oil trader and analyst community: what would be the deal compliance (in other words, how pervasive would cheating be), and which country would break away from the deal first. When it comes to the former, after an impressive run in which compliance hit and in some months surpassed 100%, mostly due to Saudi Arabia shouldering the extra production cut burden, in June it finally slid back to 92%, the lowest in months, and the first indication that the recent Saudi rising production is starting to weigh on the cartel members who are growing concerned that the Saudi commitment to production cuts may be waning.

As for the first country to defect, the odds were always highest on Venezuela, however as of today that has turned out to be a losing wager because as Argus reported, Ecuador's oil minister said the cash-strapped country faces a "difficult economic situation" and is no longer able to comply with its pledge to Opec to cut 26,000 b/d of oil production.

Today's announcement comes after the small Latin American nation had strictly followed the quota set by the Vienna deal, and from January to May Ecuador reduced its output by some 16,000 b/d. However, that ended today, when oil minister Carlos Perez said today the country is no longer complying with the quota because of its fiscal challenges.  These include a public debt close to 50% of gross domestic product and an expected 7.5% fiscal deficit for the year.

Perez claimed Ecuador has a non-written agreement with Opec that gives Quito some flexibility. In the last month and a half instead of reducing output, Ecuador has slightly increased it.

 

Perez said state-owned downstream company PetroAmazonas is now producing about 430,000 b/d and foreign oil companies, such as Spain's Repsol, China's AndesPetroleum and Italy's Agip, are producing another 115,000 b/d. That combined 545,000 b/d is a 2.19pc increase over the production average of the first four months of the year, according to oil regulator Arch.

As a reminder, this is what the agreed upon production adjustments and quotas looked like per the Vienna deal.

And so with one country of the 11 OPEC states who pledged to throttle their production already out of the agreement just six months after it was implemented, the next logical question is how much longer can the deal last in its entirety, and, obviously, who will defect next citing a "difficult economic situation" something which virtually every OPEC member nation can claim.

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Too-Big-to-Bail's picture

Now all we need is the global banking cartel to start falling apart

Deathrips's picture

Fuck OPEC and Fuck the FED. Oil should be at 15$ a barrel

 

RIPS

Looney's picture

 

In my Badass Book, Ecuador is all the way up there, firmly holding the second place – right after another country protecting Snowden.   ;-)

Looney

cheka's picture

peak oil = globalist warming

both great scams while they lasted

bchbum's picture

Petroleum is abiotic, there is an unlimited supply.  Nat Gas is 95.2% methane and about 2% ethane.  Mostly methane, with some ethane seas are found on Titan.  Even the gas giants have some methane, which is essentially nat gas.  Lawrence LIvermore labs has shown that Methane is created in the mantle.  Read Dr Gold's, "Deep Hot Biosphere" for how hydrocarbons in the mantle create methane (CH4) and Water (H20).

silverer's picture

Seems like they have just about everything we deal with in a barrel about to go over Niagara Falls.

38BWD22's picture

 

 

OPEC looks done for.  Good.

Peacefulwarrior's picture

Desperation is moving in like a thick fog, they had their run, it's over. They compete with Russia and the USA now.

Rick Cerone's picture

Don't worry. China has your back.

European American's picture

Bueno, Ecuador. FUCK the Psychopathic ZIONIST CONTROL-FREAK sadists..

Tugg McFancy's picture

That 26,000 bpd will be a real killer. They peaked 2 years ago anyway.

directaction's picture

Ecuador oil production peaked 13 years ago.

Tugg McFancy's picture

Yep, you're right, they did shit the bed and stage a big revovery between then and 2015 though, getting back almost on par with previous highs. Since then it's down again.

The Duke of New York A No.1's picture

Calling Dallas FED ... report to Oil Futures Pit asap.

 

 

 

silverer's picture

It's the finest poker game I ever saw.

GodHelpAmerica's picture

Big yawn from oil "market" on this news.

Yen Cross's picture

   Aaaannnd It's gone>>>

directaction's picture

In 2004 oil production in Ecuador peaked.
In 2006 they went into terminal decline.
Each year Ecuador produces less oil,
And consumes more oil.
They're in big trouble.

shovelhead's picture

Venezuela's next.

Molotov cocktails are creating domestic supply pressures.

ironmace's picture

oil for toilet paper?

how about oil for shampoo?

shovelhead's picture

Oil for Flamingo McNuggets.

Ink Pusher's picture

Like I said when this "miracle deal" was being originally inked.

"If they think this is actually going to work, they are more delusional than I am."

NoWayJose's picture

26,000 barrels per day? Al Gore burns that in his private jet flying to a Global Warming meeting!

Tugg McFancy's picture

Out of all the oil news, I still would have though the Saudis having problems keeping Manifa pressurised was bigger than Ecuador and 26,000 bpd.

 

divingengineer's picture

Like Iraq?
Still can't figure how that one holds.
I guess money talks, and (religious) bullshit walks.

secretargentman's picture

My Ford 460 powered RV says "YES!  Pump, baby, pump!"

sinbad2's picture

What ever happened to the free market?

This is really about the big 3 oil producers, the US, Saudi Arabia and Russia.

Just let nature take its course, and the most expensive producer will go bust.

dunce's picture

The politicians in OPEC planned on an infinite controlled supply and budgeted accordingly, the control is gone along with the administered price. The masses think getting some new leaders will solve the problem though the peak oil production varies in different countries and supply and demand are controlling prices. The big oil companies can get all the oil they want and wait the tin pot politicians out till they are willing to sign reasonable contracts. Ecuador, Venezuela, nor Nigeria can build the refineries, pipelines, labor force, and global distribution systems to be an integrated producer. All they have is a depleting resource and bad government.