Ecuador has revealed the financial stress inside OPEC created by low oil prices, becoming the first member of the group to say it’s pumping at a loss.
President Rafael Correa said on Tuesday that the South American nation is receiving as little as $30 a barrel for its crude, while production costs average about $39.
The warning comes after several other members of the Organization of Petroleum Exporting Countries, including Algeria and Libya, said the group should consider holding an emergency meeting to respond to the drop in oil prices.
“We are going through a very difficult year economically because the price of oil collapsed,” Correa said in a speech in the central highland province of Cotopaxi.
Brent crude, the international benchmark, has fallen to a six-year low of less than $45 a barrel on concerns that economic problems in China will slow demand growth just as the US, Russia, Saudi Arabia and Iraq add to a global supply glut.
The average selling price of OPEC crude averaged $40.47 Tuesday.
Ecuador is OPEC’s second-smallest member by output, with daily production of 538,000 barrels last month, according to data compiled by Bloomberg.
Oriente, the nation’s main blend of crude, sold for $36.32 on Wednesday compared with $43.21 for Brent crude, which is a higher-quality oil. The country suffers from “operating difficulties at existing, mature oil fields,” according to the US Energy Information Administration.
Other OPEC members also receive prices below Brent because their crude is heavier or contains more sulfur. Saudi Arabia sells several grades – including Arab Medium and Arab Heavy – at prices of $37 to $39 a barrel to buyers in the US Iraq gets as little as $34 for its new crude blend Basrah Heavy, according to data compiled by Bloomberg.
Algeria’s Energy Minister Salah Khebri wrote to fellow OPEC members recommending the group consider measures for reviving oil prices including an emerging meeting, according to two people familiar with the letter.
Venezuela is evaluating whether to call for a special meeting, President Nicolas Maduro said on state television Aug 12.
Saudi Arabia, the world’s largest oil exporter and de facto leader of OPEC, so far hasn’t responded to calls for an emergency meeting. The group’s next regular gathering is scheduled for December 4 in Vienna.
OPEC, which produces about 40% of the world’s oil, decided last year to keep its production target unchanged to defend market share amid rising output from higher-cost producers. The group ratified that decision at its last meeting on June 5.
Algeria and Libya need at least $120 a barrel to cover government spending plans, while Kuwait can cope with less than $50, according to the International Monetary Fund. While Saudi Arabia needs $100 to balance its budget, it has a cushion of foreign exchange reserves and little debt.
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