OPEC getting smaller with Ecuador departure

OPEC is getting smaller, again.

Ecuador said on Tuesday it will leave the Organization of Petroleum Exporting Countries in January. For OPEC, the departure matters more in symbolism than barrels — Ecuador is one of its smallest producers, but stated clearly it wants to leave the group to boost oil revenues at a moment when the whole cartel is suffering from low prices. It also comes less than a year after Qatar announced it would leave, saying it wanted to focus on natural gas production.

“Ecuador is being honest about not being able to subject itself to further cuts,” said Schreiner Parker, Vice President for Latin America at consultant Rystad Energy. The departure comes amid efforts by Ecuadorian President Lenin Moreno to reverse economic policies imposed by his predecessor. “Moreno wants to pursue his own policies, and is more market-friendly than people originally thought,” said Parker.

Ecuador has been in breach of its promised production

Ecuador stated clearly it wants to leave OPEC to boost revenues at a time the whole cartel is suffering from low prices

limits every month this year. In 2017, Ecuador said it wasn’t going to abide by the quotas, prompting a phone call from Saudi Arabia’s then Energy Mini_ster, Khalid al-Falih. In February, Ecuador’s Resources Minister Carlos Perez said again that the nation would produce more than its limit.

“We will continue to produce what we need,” Perez said at the time. “Do not forget that what is decided in OPEC is not mandatory.” Ecuador has left before — it joined OPEC in 1973 and suspended its membership in 1992. Former President Rafael Correa restarted its membership in 2007. Other countries have left and returned, including Gabon and Indonesia.

The exit sends a message to the oil industry that Ecuador is open for business in a region where Venezuela is hobbled by sanctions and economic collapse, Mexico has halted any new bid rounds, and political uncertainty is restraining investments in Argentina. Removing the risk of future OPEC-related constraints on production will make it easier to attract drillers and get financing.