The coronavirus pandemic is harming the oil market way more than the price dispute between OPEC and its allies OPEC+, RBN Energy chief executive Rusty Braziel told CNBC on Monday. RBN Energy is a Houston-based privately held energy commodities analytics company that plays a role between physical markets and financial markets. "I would say that, just off the top of my head, 15 percent of this is Saudi Arabia and Russia and 85 percent of it is Covid," Braziel said in an interview with CNBC, referring to Covid-19, the disease caused by the novel coronavirus that has put the global economy on ice. His remarks came after U.S. oil futures turned negative for the first time in history. The May futures contract, which is due to expire on Tuesday, shred all of its value after the West Texas Intermediate (WTI) dived to negative $37.63 per barrel on Monday. The price of barrels stood above $60 at the start of 2020. Crude has taken a hit from both an oil price war and the economic fallout caused by government efforts to stop the spread of coronavirus, which has become a global pandemic. A disagreement between OPEC and its allies, led by Saudi Arabia and Russia, over oil production levels in March ha let to a major sell-off in crude. In addition, travel restrictions and stay-at-home orders to control the spread of the viru have depleted demand for oil. Earlier this month, OPEC and OPEC+ agreed to an historic production of tens of millions of barrels per day, but the health crisis still persists. "The entire world is long on crude oil and the entire world is short on storage capacity," Braziel added. The phenomenon in the oil market reflects a "paper-market" problem, rather than an issue with physical barrels, he explained. "It was a squeeze in the futures market," Braziel said, adding that any company that purchased a contract is "obligated to receive physical barrels" on Tuesday "unless they get out of it before the market closes." "That's what they call convergence. The future market and the cash market converge on the final day of contract." If current situation persists, however, the challenges in the "paper market" can bleed into the physical barrel market, Braziel warned. "That means the longer that Covid lasts" and supply levels don't match demand, "it means that storage capacity continues to fill up," he said, "and most people are thinking that sometime in the not-too-distant future storage is going to fill up. And when that happens, we could be talking about physical-market negative prices."
