0346 GMT: Crude oil and refined product prices jumped during the mid-morning trade in Asia May 10, after a cybersecurity breach caused a disruption in operations of the US Colonial pipeline that supplies about 45% of all the gasoline and diesel fuel consumed on the East Coast.
At 11:46 am Singapore time (0346 GMT), the ICE Brent July contract was up 29 cents/b (0.42%) from the May 7 settle at $68.57/b, while the June NYMEX light sweet crude contract was up 19 cents/b (0.29%) at $64.90/b.
Meanwhile, for refined products, the NYMEX November RBOB contract was trading 2.81 cents/gal (1.32%) higher than the May 7 settle at $2.1550/gal and NYMEX November ULSD contract was up by 2.11 cents/gal (1.06%) at $2.0106/gal.
Margaret Yang, DailyFX strategist, told S&P Global Platts on May 10 that the rise in prices seen this morning were the result of the cyberattack on the Colonial Pipeline, which led to fears of fuel supply shortages in the country.
The Colonial pipeline is primary artery for gasoline and refined products for much of the South and East Coast. It delivers more than 100 million gal/d of fuel and heating oil to these regions.
According to media reports, even though operation on the smaller lines between terminals and delivery points had resumed, main lines remain offline, with no timeline given to the resumption of operations.
"We are in the process of restoring service to other laterals and will bring our full system back online only when we believe it is safe to do so, and in full compliance with the approval of all federal regulations," The Colonial Pipeline Company said on May 9.
The US has declared a state of emergency following the attack, lifting various limits on the transport of fuels by road to quell fears of supply shortages.
"The big unknown is how long the shutdown will last, but clearly the longer it goes on, the more bullish it will be for refined product prices," ING's head of commodities strategy Warren Patterson and senior commodities strategist Wenyu Yao said in a May 10 note.
The jump in prices seen this morning for the oil complex comes after crude prices jumped in the week ended May 7. The July contract for Brent rose 2.28% to settle at $68.28/b on May 7, whereas the June contract for NYMEX light sweet crude rose 1.78% to $64.71/b.
The rise in oil prices last week was the result of expectations that a rebound in demand in the US and Europe will compensate for the demand-destruction brought about by the pandemic in Asia. ANZ analysts said that this expectation may also have bolstered sentiment in the market this morning.
"Fuel sales in the UK rose to their highest level since the pandemic began, while US refineries are operating at their high rate in over 12 months," they said in a May 10 note.
