Country risk in Ecuador was set this Monday, September 18, 2023 at 1,749 points, about 157 points below the 1,906 points recorded on September 1.

The main factor in improving the country’s risk, according to experts, was the rise in the price of oil. Thus, WTI (Ecuadorian marked crude oil) exceeded the limit of 90 dollars per barrel this Monday. Country risk, an indicator measured by JP Morgan, assesses a country’s chances of defaulting on its debts.

According to Albert Acosta Burne, Editor-in-Chief Weekly analysisWhat has the most impact on the improvement of country risk indicators in Ecuador is the price of oil, as it is currently much improved. He explained that the Bank of America made a forecast: that by the end of the year Brent crude oil (as opposed to WTI, which is Ecuador’s branded oil) will exceed $100 per barrel. This forecast of a rising oil market improves Ecuador’s fiscal situation and therefore increases the country’s risk.

In this way, he said, fiscal problems are expected to be alleviated, but not corrected. The improvement in the price of crude oil is a consequence of OPEC’s decision to continue its restrictive policy, Acosta explained.

Preciopetroleo.net reports that oil rose to new 10-month highs on Monday, with investors focused on the prospect of a widening supply deficit in the fourth quarter after Saudi Arabia and Russia extended supply cuts. Brent and WTI have risen for three straight weeks to hit highs not seen since November 2022, and are on track for their biggest three-month gains since Russia’s invasion of Ukraine in the first quarter of 2022.

On the subject, Marios Hadjikyriacos, of the broker: “They are facing a sharp slowdown, which shows how tight the supply side of the equation has become.” China, seen as the engine of oil demand growth, remains likely to be the biggest risk due to its slow economic recovery from the pandemic.

For an oil country like Ecuador, it is positive that the price of crude oil is rising, because more resources are entering the fiscal coffers. But on the other hand, subsidies for fuel at frozen prices are also increasing, and on the other hand, consumers of free gasoline are getting more expensive for that product.