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10 May 2021 | 20:49 UTC
Highlights
Colonial pipeline expected back online this week
NYH RBOB crack weakens amid import surge
OPEC+ output hits three-month high
NYMEX refined product futures finished a volatile session slightly higher May 10 amid concerns that the shutdown of a key US pipeline could lead to supply disruptions.
June NYMEX RBOB settled up 65 points at $2.1334/gal while June ULSD climbed 60 points to settle at $2.0166/gal.
The Colonial Pipeline refined products artery, which was downed by a cyberattack May 7, should be substantially back online by the end of the week, with a phased-in restart process begun to restore service to one segment at a time, the company said May 10.
Colonial attack highlights particular vulnerability of pipelines from cyberthreats
Colonial Pipeline expects to restore most service by end week
Some Colonial Pipeline laterals open but mainlines remain down
Colonial said it began bringing segments of the pipeline back online in consultation with the US Department of Energy, which is leading the federal response.
Refined product futures had moved sharply higher at the start of the trading session, with June RBOB opening 7.81 cents above its May 7 close before surging to a session high $2.2170/gal. But the rally quickly faded as traders focused on the prospect of a relatively short outage and as strengthened arbitrages supported a spate of new transatlantic import fixtures.
"Energy markets didn't bite that this would be a prolonged delay as the spike higher with oil prices was limited, despite the attack impacting the largest oil-products pipeline in the US," OANDA senior market analyst Edward Moya said in a note.
June NYMEX WTI settled 2 cents higher at $64.92/b and ICE July Brent declined 3 cents to $68.32/b.
"The Department of Energy is working directly with Colonial to get the pipelines back online and operating at full capacity as quickly and as safely as possible," US President Joseph Biden said during a White House speech on the economy May 10.
Biden said agencies "acted quickly to mitigate any impact on fuel supply," so far loosening Department of Transportation restrictions on truck driver hours, allowing more fuel to move by highway.
"We're prepared to take additional steps depending on how quickly the company is able to bring this pipeline back to full operational capacity," Biden said.
Colonial had halted all pipeline operations because of a ransomware attack, restricting the primary artery for gasoline and refined products for much of the US South and East Coast from delivering more than 100 million gal/d of fuel and heating oil. Colonial stretches more than 5,500 miles from the Houston refining hub to New York Harbor, supplying about 45% of all the gasoline and diesel fuel consumed on the East Coast.
Concerns of supply tightness were further soothed by a spate of transatlantic import cargos now seen heading for the US East Coast.
At least 7.38 million barrels of gasoline are now expected to discharge into the US Atlantic Coast in the week ended May 14, data from ship tracking service Kpler shows, up from 6.57 million barrels the week prior and the highest level in records dating back to January 2017.
RBOB cracks edged lower amid the surge of import fixtures. The front-month ICE RBOB crack versus Brent fell to around $20.81 in afternoon trading, down from a May 7 close at $20.86/b.
A resurgent Iran pumped its largest volume of crude in almost two years in April, while an increasingly compliance-challenged Russia also boosted its output yet again, bringing total production by OPEC and its allies to a three-month high, according to the latest S&P Global Platts survey.
OPEC produced 25.28 million b/d, up 80,000 b/d from March; Russia and eight other non-OPEC partners in the group's supply accord added 13.21 million b/d, an increase of 130,000 b/d, the survey found.
The rising output is a preview of the wave of OPEC+ crude set to hit the market over the next few months.
In anticipation of rising global oil demand, the alliance plans to roll back its quotas by a 350,000 b/d in May, another 350,000 b/d in June, and 441,000 b/d in July, for a total 1.14 million b/d rise.