An oil well owned and operated by Apache Corporation in the Permian Basin, viewed on February 5, 2015 in Garden City, Texas. Spencer Platt | Getty Images

The U.S. oil industry reacted to cratering oil prices by cutting production by 900,000 barrels a day in just a month in what appears to be the biggest one-month decline since the Great Recession. U.S. government data shows that U.S. production fell to 12.2 million barrels a day last week. That's off 100,000 barrels in a week and down from a record high of 13.1 million barrels a day just a month ago. Imports fell to 4.9 million barrels from 5.7 million barrels a week earlier, and exports trickled off to 2.9 million barrels a day from 3.4 million. "The U.S. oil industry is in full retrenchment, and this is just the beginning of what will likely be steep cuts," said John Kilduff, partner with Again Capital. Kilduff said the 7% one-month decline appears to be the largest since oil production plunged 16% between August and September 2008, when just 3.8 million barrels a day were being produced. Oil in U.S. stockpiles rose by 15 million barrels to 518.6 million barrels. At closely watched Cushing, Oklahoma, oil in storage rose by about 10% in a week to 59.7 million barrels, about 25 million barrels shy of its capacity. "The market is working. It's telling producers around the world to cut production," said Andrew Lipow, president of Lipow Oil Associates. "They have to keep cutting because if you keep filling all of the oil storage and tankers, you'll just be forced to shut in because there will be no place to go."

The growth in U.S. oil production was at the heart of the dispute earlier this year between Russia and Saudi Arabia, when the world's second- and third-largest producers walked away from a more than 3-year-old production pact. OPEC and Russia have since agreed to cut 9.7 million barrels a day as of May 1 in a deal that President Donald Trump helped broker. The U.S. did not officially join the pact, but U.S. production had been expected to drop off, and it now has. There have been reports that Saudi Arabia was considering cutting sooner than May 1 because of the drop in prices, but the U.S. has moved faster to trim than OPEC and its allies just by the force of sheer economics. Producers from Texas to North Dakota are shutting in wells and curtailing plans to drill new ones. "It shows that market forces are much more effective than oil policy that is directed from on high," said Kilduff. "Market forces are much more aggressive than national oil company policies." Oil prices have plummeted this week, with a futures contract actually turning negative for the first time ever. West Texas Intermediate futures for June settled at $13.78 per barrel Wednesday, up 19%. The May futures contract was hit by wild trading Monday, plunging 300% to minus $37.63 per barrel, as the market reacted to the lack of storage space for crude. Interactive Brokers said several of its clients held long positions in the contracts but were unable to cover their losses. Interactive did so, taking a loss provision of $88 million. The oil industry is facing the twin crises of oversupply and a shocking lack of demand due to the economic shutdown in response to the coronavirus pandemic. "The coronavirus just impacted everyone in a drastic manner, and oil producers could not act fast enough for the demand destruction we've seen," said Lipow. For instance, U.S. drivers typically use about 10% of global oil supply each day in their cars, but the data shows gasoline demand is now at 5.3 million barrels a day, well below a more normal 9.6 million.

U.S. oil production monthly data