The historic oil output cuts agreed to by the world’s largest producers are bigger than what is being reported, according to Saudi Arabia’s energy minister.
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Prince Abdulaziz Bin Salman told FOX Business’ Maria Bartiromo the agreement will reduce the world’s output by 20 million barrels per day, more than double the 9.7 million that has been reported.
The prince’s comments confirm what President Trump said on Monday.
The production cuts amount to “20 million” barrels per day, Prince Abdulaziz said, adding that he is “very grateful for the work that the president did, the secretary for energy did, and to the people around the president. They were extremely helpful.”
The output cut is aimed at reducing a global supply glut that had been building even before a price war broke out between Saudi Arabia and Russia and global demand was crushed due to “stay-at-home” orders in response to the COVID-19 pandemic.
The disease and the worldwide economic shutdowns will cause world demand to drop by the most on record, according to a report released Wednesday by the International Energy Agency. The 9.3 million barrels a day of demand that has been removed from the market equates to about a decade’s worth of growth.
That demand destruction has been a factor in Brent crude prices falling by 13 percent in the two trading days following the announcement of the deal. The international benchmark fell another 3.55 percent to $28.55 a barrel on Wednesday, and has lost about 60 percent of its value this year.
While Saudi Arabia would still turn a profit at that level under its reported breakeven of $10 a barrel, the kingdom’s budget was set with a price of $70. Prince Abdulaziz said the nation has the “ability to reconfigure" and noted that all “producers are suffering,” which is why a deal was made.
While a risk remains that Russia or other countries may not hold up their end of the bargain, Prince Abdulaziz brushed those possibilities aside, saying that he “has no reason not to believe them.”
“We are all in dire need of maintaining our commitment,” he said. “None of us will gain if we don’t fulfill our commitment.”