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Oil futures fell sharply Thursday, snapping a four-day winning streak to settle at their lowest price so far this month, as the Colonial Pipeline resumed operations after shutting down late last week in response to a ransomware attack.
Traders also tracked a continued surge in COVID-19 cases in India, the world’s third-largest oil importer.
Colonial had shut down its pipeline, which provides around 45% of fuel needs to the East Coast, late last week after a ransomware attack. Gasoline shortages spread across the southeastern U.S. in the wake of the shutdown.
Colonial late Wednesday said it had initiated the restart of pipeline operations, with “all lines, including those lateral lines that have been running manually,” set to return to normal operations.” On Thursday, it said that by midday it expected each market the company services to “be receiving product from our system.”
Colonial’s progress toward restarting its pipeline system as of 7 am Eastern on Thursday.
Colonial Pipeline Company
“Despite high-profile shortages and major increases to retail fuel prices in the U.S., the impact should be short-lived, with any long-term risk potential fading as flows resume,” said Robbie Fraser, global research & analytics manager at Schneider Electric.
Read: U.S. retail gas prices top $3 a gallon for the first time in over 6 years
“The broader implication though is that the outage serves as a reminder that cyberattacks — particularly those targeting energy infrastructure — have seen a sharp rise in recent years and will remain a significant challenge,” he said in a note.
“While the outage is sure to disrupt inventory data and demand over the coming weeks, the market shouldn’t have much trouble recovering,” said Fraser. Before the pipeline outage, U.S. demand levels saw “continued improvement, which has helped to eliminate a record storage glut from 2020 and bring some clear price support moving into the summer travel season.”
On Thursday, West Texas Intermediate crude for June delivery
CL00,
CLM21,
fell $2.26, or 3.4%, to settle at $63.82 a barrel on the New York Mercantile Exchange. July Brent crude
BRN00,
BRNN21,
dropped $2.27, or 3.3%, to $67.05 a barrel on ICE Futures Europe.
Both crude benchmarks marked their lowest front-month contract settlements since April, according to Dow Jones Market Data.
June gasoline
RBM21,
lost 3% to end at nearly $2.10 a gallon, while June heating oil
HOM21,
fell 3.3% to $2 a gallon.
Oil prices may have also seen some profit taking and some “greater concern” surrounding a view that the Federal Reserve may begin to taper sooner than expected, said Arnim Holzer, macro and correlation defense strategist with EAB Investment Group, but “we believe those fears are premature.”
Read: Fed’s Bullard joins chorus on central bank saying it is not time to talk taper
“We see signals of continued demand and potential for a more globally synchronized post-COVID recovery supporting commodities,” Holzer told MarketWatch.
In India, however, “COVID cases…remain elevated, which is affecting fuel consumption in the region,” said Sophie Griffiths, analyst at Oanda, in a note. “Fuel consumption, which is considered a proxy for oil demand, fell 9.4% in April compared to March.
“The number highlights the impact that the COVID crisis and associated mobility restrictions are having on oil demand in the world’s third largest importer of oil,” she said.
Elsewhere on Nymex, natural-gas futures nearly touched an intraday high of $3 per million British thermal units, a level it hasn’t settled above since February.
The U.S. Energy Information Administration reported on Thursday that domestic supplies of natural gas rose by 71 billion cubic feet for the week ended May 7. That was generally in line with the average increase of 70 billion cubic feet forecast by analysts polled by S&P Global Platts.
The EIA said the data, however, included an adjustment to the week’s total to account for a reclassification of some gas stocks from working gas to base gas. Working gas is the volume of gas available in the market.
June natural gas
NGM21,
settled at $2.97 per million Btus, up 0.1% after touching a high at $2.998.
