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Crude Oil Prices Turn Negative as Pipeline Disruption Effect Wanes

Hinds pumping plant is seen on the Colorado River Aqueduct, in Hayfield Lake, California. REUTERS/Lucy Nicholson


Crude oil prices slipped on Monday, as the boost from a cyberattack that knocked a big U.S. fuel pipeline offline faded.

The steam appeared to go out of risk assets in general on a day when the markets are still trying to make sense of a U.S. employment report that was starkly at odds with a range of anecdotal evidence suggesting a strong recovery in the world’s largest economy.

U.S. crude prices were down 1.0% at $64.28 a barrel, while Brent crude was down 0.7% at $67.81 a barrel.

U.S. Gasoline RBOB Futures, meanwhile, were more than 2% off their Friday high, only just holding above the gain line at $2.1378 a gallon, up 0.5% on the day.

Over the weekend, there had been fresh signs of resurgent U.S. demand as the Transportation Security Administration posted a new post-pandemic high for travelers using U.S. airports at the weekend. Baker Hughes’ weekly rig count, meanwhile, failed to make a new high for the year, again suggesting that the recovery in U.S. oil output is likely to be drawn out and incomplete.

The ransomware attack that left the Colonial Pipeline Company unable to ship its usual 2.5 million barrels of oil a day to the U.S. east coast has led to underperformance in U.S. crude, as refiners have temporarily lost a key market for their output.

To compensate, newswires reported big rises in bids for gasoline cargoes already at sea in the Atlantic and those due out of European refineries.

“Similar to the February freeze crisis, the impacts will be localized,” said Rystad Energy analyst Louise Dickson in emailed comments. “While northeastern and southeastern states may see increased prices at the pump, other regions with more robust products inventories, such as the U.S. Gulf Coast, may not see the same price surge.”

She noted that the arbitrage opportunity for European refiners is likely to be limited, especially since “the two-week journey over the Atlantic at this point is still a gamble if the pipeline is swiftly restored.”

Argus Media reported that at least six tankers carrying some 3 million barrels of gasoline from the Middle East were already en route to New York harbor before the cyber-attack. The cargoes left Saudi Arabia’s Jubail port between the end of March and the beginning of May, Argus said, citing research by the consultancy Vortexa.

New York regional gasoline prices ticked up last week after Phillips 66’s 250,000 b/d Bayway refinery registered an outage at its gasoline unit

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