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Crude falls on US Colonial Pipeline resumption hopes, pandemic concerns

London — 1026 GMT: Crude oil futures traded lower in the morning trade in Europe May 11, with market participants anticipating a resumption in the operation of the Colonial Pipeline.

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At 11:26 am London time (1026 GMT) May 11, the ICE Brent contract was down 48 cents/b (0.7%) from the May settle to $68.32/b, while the June NYMEX light sweet crude contract was up 55 cents/b (0.8%) at $64.93/b.

Market participants told S&P Global Platts May 11 they expect the US Colonial Pipeline to resume operations by the end of the week of May 9. The expectation of supply resumption has exerted some pressure on crude values, although broad negative macro sentiment also impacted prices. However, European energy analysts said that any delay in the reopening of the pipeline is likely to add more support to crude values.

"You aren't going to get big moves every single day, these moves are sometimes the result of the day-to-day volatility. We expect the issue with the Colonial Pipeline to be resolved by the end of this week, so none of yesterday's premium should be expected to stay," said Amrita Sen, head of research at Energy Insights. "More broadly, the move up to $69/b for Brent was largely due to large macro buyers anticipating reflation and targeting all asset classes, not just energy."

"Today's price fall is a result of macro selling, as well as a bit of negative sentiment around Chinese and Indian demand, and coronavirus resurgence elsewhere," Sen added.

Overall, the market is looking ahead to the second half of 2021, with the rally in the derivatives market leading the physical market. Currently, traders and analysts do not expect buying weakness in India to last beyond June, and broadly believe that the current coronavirus situation is unlikely to have a long-term negative impact on demand.