Oil fell with global equities after a recent rally that has taken some commodities to record high levels brought on concerns over inflation.
U.S. crude futures were down 1.2%. Gasoline and heating-oil markets were also weaker with the hacked Colonial Pipeline system in the U.S. returning operations at one section of the key link. Full services are expected by the end of the week, though some Gulf Coast refiners are already cutting processing.
While the pipeline halt is causing some retail gasoline shortages, U.S. crude oil prices remain capped near $65 a barrel. The market’s structure has weakened in recent days, suggesting coronavirus-induced demand concerns are returning, particular as the virus spreads afresh across parts of Asia. Still, consumption in the U.S. and Europe has been recovering.
“After taking into account the fact that the Colonial Pipeline is expecting to resume full services by the end of the week, the market appears to have set aside the incident as a temporary disruption,” said Vandana Hari, founder of Vanda Insights. “Oil market attention is shifting back to the global dichotomy between countries emerging out of the Covid storm and some still in its grip.”
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The knock on impact of the Colonial disruption is starting to ripple through to everything from refining to shipping. Among processors, Total SE scaled back activity in a key unit at its Port Arthur, Texas, refinery, and Citgo Petroleum Corp. cut rates at its Lake Charles, Louisiana plant. There’s been a rush to book oil tankers as traders seek to redress the supply imbalance caused by the stoppage.
The main three main energy agencies will release their monthly oil market updates this week, starting with the Organization of Petroleum Exporting Countries on Tuesday. The group and its allies are continuing with a plan to steadily add supplies back to the oil market.
