Ecuador will not honor the Organization of Petroleum Exporting Countries’ (OPEC) agreement to cut oil output, Ecuador’s Oil Minister Carlos Perez said this week. The country, one of OPEC’s 14 member countries, is rethinking its commitment to drop oil production to 522,000 barrels a day.
Ecuador agreed to artificially keep output low to help raise the price of oil and drain an international oil glut, Bloomberg reports.
”There’s a need for funds for the fiscal treasury, hence we’ve taken the decision to gradually increase output,” Perez said, according to Bloomberg. “What Ecuador does or doesn’t do has no major impact on OPEC output.”
The move was expected, as OPEC members often cheat whenever a deal to cap production is made. However, the public announcement by the oil minister is a new twist.
Ecuador claims it has a “non-written” agreement that gives it authority to reform the arrangement based on its own fiscal needs. No record of Ecuador’s interpretation of the OPEC agreement has been released, though, according to Bloomberg.
While OPEC has experienced more success than most cartels, lasting 57 years compared to the average 3.7 to 7.5 of the average cartel, the current oil glut, compounded with increasing U.S. control of the international oil market, is stressing members’ commitment to the cartel, OilPrice.com reported in April.