Commodities, Emerging Markets, Energy

Wishful Thinking: Ecuador’s President Rafael Correa Thinks $200 Oil On The Horizon

Ecuador Correa$200 per barrel oil !

WTF? Are you on drugs? Are you crazy? — All common responses to such a statement during this current time of crisis and turmoil.

Well, one such person actually believes oil is set to surge to such a level…

Ecuador’s President Rafael Correa.

The President of Ecuador believes that $200 oil may be on the horizon.

Correa says that he thinks that the price of oil may soar up to $200 per barrel in the “medium term”, Ecuador’s El Universo reports.

Correa says the believes that a surge in the price of oil may come as investment in the oil sector continues to dry up and as more drilling rigs shut down due to unprofitability against the backdrop of low oil prices.

“The reduction in investment, which is going through the oil sector, the decommissioning of hundreds of drilling rigs, including in the U.S., which at these prices can’t make a profit, all this in the medium term will lead to higher prices up to $200,” said Correa, during an interview following a visiting session of the government of Ecuador, held in the city of Chillanes in the province of Bolivar.

Correa’s comments come following a preliminary deal between Saudi Arabia and Russia to freeze oil output at near all-time levels, the first coordinated collaboration by the world’s two largest oil producers to counter a slump that has pummeled economies, markets, and companies amid a global supply glut.

Qatar and Venezuela also agreed to freeze oil production and asked for others to follow. However, Iraq continues to boost production as it recovers from years of conflict and lack of investment, also Iran has resisted and said that it will not forgo its share of the market as it ramps up production following the lifting of sanctions.

The President of Ecuador, the country that has smallest oil reserves among all the members of the Organization of Petroleum Exporting Countries (OPEC), said that the talks between Russia and Saudi Arabia were a positive sign for the market. According to him, the market underestimates the possible consequences of the meeting.

“The sooner the price will find its equilibrium at a reasonable level, the better for producers and consumers, the better for our planet.” Correa said.

For over a year Venezuela has repeatedly urged for OPEC members to meet to discuss curbing production as crashing oil prices deplete its government revenue, and last month Ecuador joined in with a very vocal message.

Correa said in late January that his government was “tired” of pushing OPEC to decrease output and that his nation will continue working as if the oil cartel “did not exist.”

Ecuador joined OPEC in 1973. In 1992, the Ecuadorian government decided to pull out from the cartel, having refused to limit oil production to cartel’s quota and pay annual fee of $2 million to the budget of the organization.

In 2007, after Correa was elected President of Ecuador, the country returned to OPEC and has since remained a member of the cartel. However, Ecuador has the smallest oil and gas reserves among all OPEC members. In 2015, the country produced the daily average of 545,000 barrels of oil, or 1.7 percent of OPEC’s entire oil production.

Watch the interview below with Ecuador’s President Rafael Correa, courtesy of the Presidencia de la República del Ecuador

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