Crude Oil Price Eyes EIA Report As Pipeline Shutdown, India Fog Outlook

Crude oil appears to be flatlining so far this week, with prices hovering just below the 65 mark. The lack of volatility in energy prices comes despite a major supply shock. Over the weekend, a major fuel pipeline, running from the Gulf Coast to the Atlantic Northeast, was shut down due to a ransomware attack. That has also forced the US government to declare a state of emergency across many east coast states.

Colonial Pipeline, the company that runs the passage – which carries around 2.5 million barrels of refined fuel product per day—aims to restore operations later this week. However, a big question mark hangs over the timeline, and the longer the pipeline remains shutdown, the larger the impact will be on US energy prices.

The emergency order implemented by the Biden administration loosens restrictions on alternate delivery methods to blunt the shutdown’s impact, but compensating fully for the supply shortfall is not possible with the current infrastructure. The pipeline cyberattack is the second major supply shock to energy markets this year following the Suez Canal blockage. Year-to-date, crude oil prices are up over 30%, with May on track to extend gains from April.

The global economic reopening from the Covid pandemic continues to drive bullish energy into oil markets. As major economies continue to reopen as vaccination rates improve, oil-hungry industries will come back online, bolstering demand – or so that is the prevailing narrative. The situation in India, while not yet making a major impact on global sentiment, is endangering that thesis. In fact, the World Health Organization (WHO) reclassified a Covid variant in India to a “variant of concern.”

That said, energy traders will be closely monitoring the situation in India as the worsening situation’s fallout may start to seep into market sentiment, which would likely present a headwind for oil prices. Alternatively, a bright spot for the Covid picture appeared today when the US Food and Drug Administration (FDA) approved the Pfizer-BioNTech vaccine for use in children aged 12-15. The move by the US regulator is seen as a boon for the country’s vaccination efforts, which is already ahead of most of its peer economies.

1 2
View single page >> |

Disclaimer: DailyFX, the free news and research website from IG, is one of the world's leading sources for news and analysis on the ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.