Last month Ecuador became the first country to move out of the OPEC agreement that was reached in November last year and was extended at a May OPEC/N-OPEC meeting until March next year with an aim to bring down the production by 1.76 million barrels per day. Ecuador announced that it is voluntarily scrapping the agreement as deficit pressure increases. Since Ecuador is a small scale producer, the market didn’t pay much attention to it, except for the fact that it could have been the beginning of further defection from the agreement by other members.

Since the extension of the agreement failed to push oil price higher, which is down more than 6.5 percent since the agreement, the compliance with the deal has somewhat diminished within OPEC members. In July, compliance within the OPEC declined to just 75 percent, while YTD compliance is at 87 percent.

Ecuador is a small producer with Just 0.528 million barrels per day production in June. Since the defection in June, production has increased somewhat to 0.536 million barrels per day in July. Ecuador’s oil minister said this week that despite the defection, the country will maintain a cap around 0.541 million barrels per day so that it doesn’t undermine the OPEC’s effort too much.