US gasoline, diesel prices respond to Colonial outage

US gasoline futures fell this morning as work continues to restore the largest transportation fuel pipeline system moving products from the US Gulf coast to the New York Harbor market following a cyber attack.

June Nymex RBOB futures were trading around $2.16/USG, down from an open of $2.2050/USG following the shutdown of Colonial Pipeline's roughly 2.5mn b/d fuel pipeline system stretching from Texas to New Jersey. Futures prices were about 1.5pc higher than the 7 May settlement. The ongoing outage helped to lift European gasoline prices as traders eyed cross-Atlantic deliveries to make up for pipeline supplies.

Diesel futures also eased from an open of $2.06/USG to $2.0371/USG. US diesel demand has been stronger than gasoline demand, but the Atlantic coast has reported roughly average inventories for the season.

Crude futures were also slightly higher. An extended outage on the Colonial system could force more than 8mn b/d of US Gulf coast refining in the nation's largest refining hub to cut rates for lack of an outlet for their production.

Colonial notified shippers late 7 May that it shut the 5,500-mile (8,851km) products pipeline system to contain a ransomware infection. The lines move gasoline, diesel and jet fuel from suppliers along the Texas coast, Louisiana and Mississippi through terminals throughout the US southeast and up the Atlantic coast into the New York Harbor market.

The company yesterday restored operations at terminals and smaller branch lines moving fuels to inland markets. But the major trunk lines moving fuels from the largest US refining hubs to the Atlantic coast remained shut today.

Colonial offers the only pipeline connection stretching from the US Gulf coast to the key New York hub. Kinder Morgan's 700,000 b/d Products Pipe Line system, formerly known as Plantation Pipeline, moves fuels from Louisiana to Virginia. Shipping fuels between US ports requires the use of costlier, US-flagged and crewed Jones Act tankers. Federal officials can waive those requirements in an emergency.

By Elliott Blackburn