Oil futures moved lower on Monday, giving up earlier gains, seen after a ransomware attack forced the shutdown of pipelines supplying around 45% of fuel to the East Coast. Crude turned lower on expectations that the U.S. will have to slow its refining activities and boost imports of gasoline.
Georgia-based Colonial Pipeline Co., which operates the 5,500-mile Colonial Pipeline system that transports fuel from Gulf Coast refineries to the East Coast, said over the weekend that it was the victim of a ransomware attack and had temporarily shut down pipeline activity to contain the threat.
Oil prices pulled back as “talk of traders booking European cargoes for gas to import to the U.S., as well as fears that refining runs in the Gulf Coast will have to slow” due to the pipeline shutdown, said Phil Flynn, senior market analyst at The Price Futures Group.
Read: Pipeline cyberattack linked to criminal gang that targets corporations
West Texas Intermediate crude for June delivery CL00, -0.09% CLM21, -0.09% fell 80 cents, or 1.2%, to $ 64.10 a barrel on the New York Mercantile Exchange. July Brent crude BRN00, -0.12% BRNN21, -0.12%, the global benchmark, was down 70 cents, or 1%, at $ 67.58 a barrel on ICE Futures Europe.
Gasoline futures jumped early Monday on Nymex, then eased back along with oil prices. The June contract RB00, +0.08% RBM21, +0.08% fell 0.4% to $ 2.12 a gallon after trading as high as nearly $ 2.22. June heating oil HO00, +0.20% HOM21, +0.20% edged down by 0.4% to $ 2 a gallon.
“The big unknown is how long the shutdown will last, but clearly the longer it goes on, the more bullish it will be for refined product prices,” said Warren Patterson, head of commodities strategy at ING, in a note.
Colonial late Sunday afternoon said some smaller lateral lines between terminals and delivery points are now operational. The company said it was in the process of restoring service to other laterals, but would bring the full system back online only when it appeared safe to do so, and in compliance with all federal regulations.
“Stronger prices on the U.S. East Coast will drag refined product prices higher in other regions, given that an extended shutdown will see the East Coast having to turn to waterborne cargoes, particularly from Europe,” Patterson said.
Also on Nymex Monday, June natural gas NGM21, -0.85% traded at $ 2.91 per million British thermal units, down 1.5%.