Oil futures fell sharply Thursday, on track to snap a four-day winning streak, as the Colonial Pipeline resumes operations on the U.S. East Coast after shutting down 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, over the weekend 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 late Wednesday, saying in a statement that “all lines, including those lateral lines that have been running manually, will return to normal operations.”
“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.
“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 daily market update.
“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.”
In Thursday dealings, West Texas Intermediate crude for June delivery
dropped $1.69, or 2.4%, to $67.63 a barrel on ICE Futures Europe.
In India, “COVID cases in India 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 a 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
traded at nearly $2.98 per million Btus, up 0.2% after touching a high at $2.998.