US oil expected to rise after a ransomware attack shuts down major product pipeline
The shutdown of the 2.5 million barrels per day capacity Colonial Pipeline will have an impact on the supply of products
Crude oil futures in New York are expected to jump during the opening session on Monday after a cyberattack shut a significant pipeline in the US.
A ransomware attack on Friday led the Colonial Pipeline, the most significant route for transporting refined products, to shut down temporarily. The pipeline accounts for nearly half of the fuel consumed by states along the US Gulf Coast.
A ransomware attack involves encrypting data with malicious software, which leaves systems locked until an extortion fee is paid to the hackers.
The attack is the biggest of its kind on a US pipeline.
"At this time, our primary focus is the safe and efficient restoration of our service and our efforts to return to normal operation,” the company said in a statement.
The company has not yet mentioned when it will resume service.
US crude futures, which settled 0.29 per cent higher at $64.90 per barrel on Friday, are expected to make significant gains due to the outage.
"I expect WTI [West Texas Intermediate] to open higher tomorrow as it has the potential to disrupt supplies throughout the US North East," said Jeffrey Halley, Asia Pacific senior market analyst, at Oanda.
Futures for refined projects such as gasoline are likely to gain the most, with WTI acting as a proxy, he added.
Demand for gasoline has increased in the US, the world's biggest producer of oil and gas, as the country emerges from Covid-19 restrictions.
The shutdown of the pipeline, which has a capacity of 2.5 million barrels per day, as a precautionary measure will have an impact on the supply of products including gasoline, diesel and jet fuel to the US east coast from the Gulf Coast.
The disruption is expected to further fuel the rally in Brent, the international benchmark, which is inching closer to the $70 per barrel threshold.
Brent, under which two-thirds of the world's crude is traded, closed 0.28 per cent higher at $68.28 per barrel on Friday.
"WTI was up by 2 per cent in last week’s trade with early weekly gains providing a strong momentum thrust," said Vijay Valecha, chief investment officer at Dubai-based Century Financial.
"However, this was countered by selling pressure ... towards latter sessions as a continuous rise in new Covid-19 cases across India pressurised the markets."
The devastating second wave of the pandemic has crushed India's already fragile healthcare infrastructure. The country of 1.37 billion has been reporting over 400,000 daily cases over the last couple of days, with more than 22 million infections registered so far.
Published: May 9, 2021 04:51 PM