x Abu Dhabi, UAESunday 23 July 2017

Ecuador cuts oil output

The South American country will reduce oil production by at least 20,000 barrels per day (bpd).

Ecuador has become the second Opec member to reduce oil production, following the example set by the UAE last week.
Ecuador has become the second Opec member to reduce oil production, following the example set by the UAE last week.

Ecuador has become the second Opec member to reduce oil production, following the example set by the UAE last week. The Ecuadorean president, Rafael Correa, announced on Saturday that his nation would cut at least 20,000 barrels per day (bpd) as part of Opec's plan to reduce output. The Abu Dhabi National Oil Company said last Wednesday it would trim output by 200,000 bpd. Ecuador is required to reduce output by 40,000 bpd as part of a cut of 2.2 million bpd agreed by the group at a meeting on Dec 17 in Algeria. The Andean country pumped just under 500,000 bpd last month. Opec is struggling to convince oil markets that it can curtail supply in an effort to reverse the price slide. In the days after the meeting in which the production cut was unveiled, prices for West Texas Intermediate crude fell US$10, threatening to hit $30 a barrel. Opec members will need to demonstrate that they can implement the cuts before they can expect the price to start rising again. Although Ecuador is the smallest Opec producer, it has ignored the organisation's decisions in the past. Prices rose $2.36 to $37.71 a barrel on Friday on news that Abu Dhabi would reduce output. Oil markets were closed yesterday. Chakib Khelil, the Opec president and minister of energy and mines for Algeria, said member states were going ahead with production cuts that would start to influence oil prices in one to two months. "Many countries have implemented the reduction. I think all of them will implement it because they do not have a choice," Mr Khelil told Algerian state radio on Saturday. "I think this reduction will have an impact on prices in January-February, because it is a strong reduction." Ecuador's government appeared to be using the cut as an opportunity to punish foreign companies that have been reluctant to renegotiate oil production contracts in its favour. All of the cut announced on Saturday would be met by Agip Oil, a subsidiary of the Italian company, ENI, Mr Correa said. "We will comply with the Opec and slash production of private [contracts] where we are losing money," he said during his weekly radio address. The rest of the agreed cut of 40,000 bpd would be met by other private companies, he added, without specifying which ones. As oil prices rose earlier this year, the government urged foreign companies to scrap existing production-sharing agreements in favour of fixed-fee service contracts, but none of the companies took up the offer. In October, Mr Correa, a leftist who has been critical of the oil industry, vowed on state radio to renegotiate Agip's contract. Ecuador has historically been known as one of the more recalcitrant Opec members. It withdrew from the group in 1992, in part because it wanted to produce over its quota. It rejoined last year, but officials said last month they would ask Opec if Ecuador could be exempt from a cut of 1.5 million bpd agreed at the end of October. * with agencies cstanton@thenational.ae