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According To Iran News, The United States is on track to cut 1.7 million barrels of oil production per day, according to Reuters calculations of state and company data shared on Thursday.

It was US President Donald Trump that suggested at the beginning of April, prior to the most recent OPEC deal signing that the United States would cut its oil output as a natural response to the worsening market conditions. The statement was not initially good enough for OPEC, who wanted more of a commitment from the world’s largest producer and consumer of crude oil, Oil Price reported.

“Well, I think it’s automatic. Because they’re already cutting. I mean, if you look, they’re cutting back. Because it’s… it’s market. It’s demand. It’s supply and demand. They’re already cutting back, and they’re cutting back very seriously,” US President Trump said at a press briefing early last month.

OPEC+ eventually agreed to cut production by 9.7 million bpd—a landmark figure that is significantly larger than previous OPEC cuts in recent years. Its non-OPEC allies who partnered with OPEC in the deal pledged to cut an additional 10 million bpd.

US Energy Secretary said last month that the DoE expected that production in the United States would fall by between two and three million bpd by the end of the year—it appears the cuts have come even quicker than the department expected.

The need for the production cuts grew more evident as the United States shut down nearly all activity in an attempt to flatten that curve of infections that sought to overwhelm the country’s healthcare system. Doing so, however, has idled much of the economy and crippled demand—and as such, its oil and gas industry that fuels that economy.

The cuts from US producers may seek to quiet the disgruntlement of OPEC and Russia, in particular, who expressed their displeasure that the US would not require its producers to curb production. After all, the US shale industry has benefited greatly from previous rounds of OPEC cuts.

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The West Texas Intermediate contract for June delivery fell 20 percent to a low of $10.07 a barrel in early London trading, before regaining some of that loss to trade around $12 by lunchtime. The volatility came on the heels of a 25 percent plunge in the price of the same contract on Monday, the Financial Times reported.

Extreme price swings have rocked global oil markets in recent sessions. Last week, WTI crude for May delivery fell to negative $40 a barrel shortly before expiry, marking the first time in history that the price of an oil contract had fallen below zero.

The coronavirus pandemic has reduced demand for oil by close to a third, raising concerns that a glut of unwanted supplies will overwhelm global storage capacity.

Oil tanks have been filled up or booked out by traders, while the amount of crude and fuel being stored at vessels at sea has surged, with IHS Markit putting seaborne crude stocks at 175m barrels, up from 100m in late March.

Robert Rennie, Sydney-based head of market strategy at Westpac, said the industry was approaching the limit of its storage capacity, including floating storage, which was having an “a depressing effect” on prices.

Traders said the only resolution will be for production to start shutting down or throttling back, but most oil companies are hesitant to make the first move.

Oil-producer group Opec and its allies such as Russia are due to start cutting about 10 percent of global supplies from early May — though that may be accelerated — but the size of the demand drop at the peak of lockdowns and travel restrictions is closer to 30 percent of the normally 100m-barrels-a-day global market.

Volatility in crude markets has been exacerbated by exchange-traded funds. The tumble in US prices on Monday was driven by the world’s largest oil-backed ETF starting to sell off its positions in June futures contracts, moving into contracts for later delivery.

S&P GSCI, one of the largest funds tracking a basket of commodities, said on Tuesday it would move all of its positions out of the June WTI contract at the close of trading — as long as they were not already in negative territory — adding a further wave of selling pressure.

“No one wants to be among the last to close out their position ahead of expiry, fearing a repeat of the May expiry,” said Warren Patterson, Singapore-based head of commodities strategy at ING. “The move we are seeing suggests that the June contract is going to become increasingly illiquid, and as a result, will likely suffer from increased volatility in the lead up to expiry.”

Brent crude for June delivery also initially slid on Tuesday, falling to a low of $18.73 a barrel before recovering to $20.08 by lunchtime, putting it marginally higher on the day. The international oil market last week dropped below $20 a barrel for the first time in almost two decades.

Prices for physical cargoes in the spot market for delivery in the next couple of weeks are even weaker.

The price of dated-Brent, a physical benchmark based on a basket of North Sea crudes that is assessed by pricing agency S&P Global Platts, fell to $13.65 a barrel on Monday, down almost 15 percent on the day — a sign that traders have little desire for cargoes anywhere in the world.

Other energy markets have also been hit, with the price for cargoes of liquefied natural gas (LNG) falling to the lowest on record, trading at less than $1.90 per million British Thermal Units (MMBTU). That is down more than 60 percent from the start of this year.

Equity markets in Europe shrugged off volatility in oil prices to push higher by lunchtime. The European benchmark Stoxx 600 added 1.5 percent, with London’s FTSE 100 and Germany’s Dax delivering similar gains. Futures trading tipped the US benchmark S&P 500 index to open 1.2 percent higher when Wall Street gets underway.

Equity markets across Asia-Pacific had also been largely unmoved by ructions in the oil market overnight. Japan’s Topix was flat, while South Korea’s Kospi edged up 0.6 percent and China’s CSI 300 added 0.7 percent.

Brokers said broad support from big central banks had provided some support for stock markets. The Bank of Japan on Monday said it would buy an unlimited amount of government bonds and keep interest rates low. Investors are also focused on meetings this week by the European Central Bank and US Federal Reserve.

On Monday, the S&P 500 climbed 1.5 percent in response to signs that some US states could soon begin resuming economic activity, suggesting a potential pathway for a gradual reopening of the world’s biggest economy.

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Brent crude prices had fallen by more than 50 percent over the last week, reaching its lowest level since June 1999. The dramatic drop was due to concerns that crude storage tanks are running out of space, RT reported.

On Wednesday, US President Donald Trump had warned that the US Navy would attack Iranian gunboats if they “harass our ships at sea,” reigniting fears of a conflict in the Persian Gulf.

West Texas Intermediate (WTI) had similarly plunged to a negative price for the first time in its history on Monday. The price has since recovered as well, growing to $15 per barrel.

The global oil markets have been experiencing a glut due to a steep drop in demand amid the  COVID-19 pandemic.

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US benchmark West Texas Intermediate for May delivery was changing hands at $0.56 a barrel after closing at -$37.63 in New York.

Space is scarce to store oil amid the current glut, meaning there have been few buyers for the commodity.

The May WTI contract closes Tuesday, and the contract for June delivery is now more actively traded. That enjoyed a modest increase Tuesday after heavy falls a day earlier, rising to above $21 a barrel.

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