Singapore — 0332 GMT: Crude oil and refined product prices slumped during mid-morning trade in Asia May 11, as fears of a shortage in supply of refined products in the US East Coast eased despite the Colonial pipeline remaining offline, and as sentiment soured after the World Health Organization declared India's B.1.617 coronavirus strain as a variant of concern.
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At 11:32 am Singapore time (0332 GMT), the ICE Brent July contract was down 54 cents/b (0.79%) from the May 10 settle at $67.78/b, while the June NYMEX light sweet crude contract was down 53 cents/b (0.82%) at $64.39/b.
For refined products, the NYMEX June RBOB contract was trading 1.47 cents/gal (0.69%) lower from the May 10 settle at $2.1187/gal and NYMEX June ULSD contract was down 0.86 cents/gal (0.43%) at $2.0080/gal.
The Colonial pipeline, a primary artery for transport of gasoline and refined products, was downed by a cyberattack on May 7. The cyberattack jeopardized the transport of up to 100 million gal/d of fuel and heating oil to the South and East Coast, raising fears of a supply shortage in these areas.
These fears have since abated, putting pressure on crude and refined prices, which had moved higher in the aftermath of the attack.
"Refined product markets do not seem overly concerned about the disruption to the Colonial pipeline...The pipeline is set to start up gradually over the coming days, and the company expects operations to be largely restored by the end of this week," ING's head of commodities strategy Warren Patterson and senior commodities strategist Wenyu Yao said in a May 11 note.
Meanwhile, sentiment in the market took a beating after WHO classified India's B.1.617 strain of the coronavirus as a global variant of concern, as scientists said that the mutations seen in the strain may be making it more transmissible. It is unclear whether the strain is resistant to vaccines.
"Also weighing on crude prices was the WHO's reclassification of the highly contagious triple-mutant COVID-19 variant spreading in India as a variant of concern," Edward Moya, senior market analyst at OANDA, said in a May 11 note.
India's government had earlier said that the country's debilitating second-wave may have been caused by the mutant strain. Concerns over the progression of the pandemic in India remain elevated, even though new infections dipped marginally to 366,494 on May 9, latest data from John Hopkins University showed.
In inventory news, market analysts surveyed by S&P Global Platts expect a slight uptick in US refinery utilization to have sent the country's commercial crude stocks 4.1 million barrels lower in the week ended May 7 to around 481 million barrels. For stocks data, market participants will be looking forward to reports by the American Petroleum Institute and the Energy Information Association due to be released May 11 and May 12, respectively.
Market participants will also be awaiting the monthly OPEC oil market report, due for release May 11, which will include the coalition's April production numbers, and its latest outlook on the market.