Ecuador to withdraw from OPEC in January 2020
Ecuador will withdraw from 14-nation Organization of the Petroleum Exporting Countries (OPEC) from 1 January 2020. The country stated its internal fiscal problems as the reason for the withdrawal from the group.
The Andean nation (i.e. a group of nations in South America connected by Andes mountain range) is attempting to increase its production of crude oil in a bid to raise more income. On multiple occasions Ecuador has not compiled with the output quota fixed by OPEC.
This measure is also in line with national government’s plan to reduce public spending and generate new income. Despite leaving OPEC, the country will however continue to support efforts to stabilize the world oil market.
Ecuador joined OPEC in 1973 had earlier withdrawn from the bloc in 1992. However, it rejoined the organization in 2007. It is also not the first country to do so, as earlier other small former OPEC members have also left the organisation for fiscal reasons such as Indonesia suspended membership in 2016 as the country sought to increase oil exports.
Currently, Ecuador produces about 545,000 barrels per day (bpd) of crude, but is struggling with tight liquidity because of a wide fiscal deficit and huge foreign debt. In February 2019, Ecuador reached a $4.2 billion deal with IMF (International Monetary Fund) which allowed it to receive an immediate disbursement of $652 million and opened the door for an additional $6 billion in loans.
Category: International Current Affairs