More OPEC countries selling oil below cost of production

Bloomberg/Fuel Fix:

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 U.S., Russia, Saudi Arabia and Iraq add to a global supply glut. The average selling price of OPEC crude averaged $40.47 Tuesday, the group said in a statement.

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 U.S. 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 andArab Heavy– at prices of $37 to $39 a barrel to buyers in the U.S. 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.
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State owned oil companies are less efficient and less willing to cut costs of production.  They are also less likely to invest in the technology US producers are doing that makes them more efficient.  There greed and market manipulations actually helped pay the way for the shale oil revolution which has caused them to suffer in the current glut.  They also have a dilemma.  If they reduce production to help raise the price of oil non OPEC producers like the US will be more likely to profit from the move.

Ecuador is a poorly run country on the socialist model.  It has its share of corruption as demonstrated by its courts in the fraudulent case against Chevron.