Fuel prices spike, then trim gains as Colonial mainlines remain shut

  • Fuel prices jumped before paring gains as futures markets opened following the cyberattack that has shut the Colonial Pipeline, the primary artery for refined products in the eastern half of the U.S.
  • Nymex June RBOB (XB1:COM) +2.6% to $2.1826/gal before paring gains to trade at ~$2.165/gal, and Nymex June ULSD (HO1:COM) +1.3% to $2.0373/gal before slipping back to ~$2.036/gal.
  • Crude oil prices are up modestly, with June WTI (CL1:COM) +0.7% to $65.35/bbl, and July Brent (CO1:COM) +0.8% to $68.81/bbl.
  • ETFs: XLE, UGA
  • Colonial still has not provided a timeline for bringing the pipeline back into service but said today that while its main lines remained offline, some smaller lateral lines between terminals and delivery points are now operational, and it is developing a plan to restart the pipeline when it gains approval from federal regulators.
  • Analysts say a pipeline closure of a few days should not have dramatic market impacts, because inventories of gasoline have been readied for the summer driving season and are roughly on par with seasonal averages.
  • But shortages could begin to affect retail stations and consumers along the east coast if the pipeline remains offline for five days or longer.
  • According to S&P Global Platts Analytics, if the pipeline remains down, inventories will reach five-year lows by May 14.
  • The southeastern U.S. would be the first to see higher gasoline prices at the pumps due to the supply disruption caused by the shutdown.
  • Airlines in the region also would be vulnerable to a prolonged outage; airports served by Colonial include some of the busiest in the country, including Hartsfield-Jackson in Atlanta.
  • Meanwhile, security experts say the energy industry is ill-prepared for cyberattacks, as some operational technologies for physical systems such as pipelines and the electric grid have protocols that predate those for the internet.
  • The attacks are "here to stay and we have to work in partnership with businesses to secure networks [and] defend ourselves," Commerce Secretary Gina Raimondo said on CBS's Face the Nation, adding the Colonial attack "is an all-hands-on-deck effort right now."

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