Shutdown of the largest oil pipeline in the United States: what about oil prices? | R Blog RU

Most likely, you have already noticed how over the past week the topic of oil and the cost of fuel brands Brent and WTI has enslaved the entire news feed. So we consider it our duty to figure out what is happening in the world oil market, what caused the fuss and what consequences to expect.

Colonial Pipeline Suspended Due to Cyber ​​Attack

On May 7, Colonial Pipeline announced that it was undergoing a cyberattack. The solution to the situation required the shutdown of some electronic control systems, which led to the suspension of the operation of the largest oil pipeline in the United States.

According to Bloomberg, hackers, presumably from the DarkSide group, hacked into the information system of the oil company, took possession of almost a terabyte of its internal data and demanded a ransom.

At the time of this writing, the pipeline has not been fully operational. According to official information, the supply of petroleum products will resume in full by the end of the week.

Important information about the Colonial Pipeline

  • Built in 1964.
  • The length is 8,850 km.
  • The transported volume is 2.5 million barrels per day.
  • Supplies 45% of oil products to the East Coast.
  • Directly connected to major airports from Atlanta to New York.

Analysis of changes in oil prices

From May 7 to May 12, at the time of preparation of the material, the cost of July futures for Brent crude oil increased by 1.54%, from $ 68.09 to $ 69.14 per barrel. The price of the June futures for WTI black gold over the same period of time increased by 1.8%, from $ 64.71 to $ 65.88 per barrel.

Analyst Maxim Artyomov’s opinion on the prospects for black gold:

“The daily chart shows that Brent is trading above the 200-day moving average. This indicates a continuation of the upward trend. On the technical side, the price is testing the resistance level, a breakdown of which will mean continued growth. The target at this stage can be considered a mark of $ 76 per barrel. : Overcoming it will be a signal for further growth in quotations. In the long term, after rollbacks, Brent crude oil may rise to $ 93 “.

“As for the WTI mark, its daily chart shows a similar picture: quotes are moving along the lower border of the channel, continuing the development of an upward trend. At this stage, they are testing the horizontal resistance level, a breakdown of which may be a signal for continued growth. 200-day moving average is still below quotes, which, in turn, indicates the priority of buyers in the market. The first target for growth in the medium term may be $ 75 per barrel, then the price rise to $ 90 is not ruled out. “

Technical analysis of WTI crude oil prices as of 05/12/2021.

Consequences of fuel supply interruptions

Florida Gov. Ron DeSantis declared a state of emergency on May 11 due to disruptions in the supply of petroleum products caused by the suspension of the Colonial Pipeline. The state of emergency was introduced for 30 days with the possibility of extension.

On the same day, US airlines reported fuel shortages. Many airlines are forced to either cancel or change long-haul flights. The situation immediately affected the value of securities of representatives of this sector.

For example, American Airlines Group (NASDAQ: AAL) shares fell 1.95% to $ 21.57; Southwest Airlines (NYSE: LUV) – up 2.56% to $ 59.78; Delta Air Lines (NYSE: DAL) – up 2% to $ 44.52; United Airlines Holdings (NASDAQ: UAL) – up 2.46% to $ 52.7.

OPEC April Report

  • Oil production increased by 26,000 barrels per day to 25.08 mln.
  • The forecast for demand in the second quarter is 94.79 million barrels per day.
  • The forecast for demand in the third quarter is 97.90 million barrels per day.
  • The forecast for demand in the fourth quarter is 99.74 million barrels per day.

Summing up the result

The largest oil pipeline in the United States was suspended due to a hacker attack. This caused fuel shortages on the East Coast and a rise in the price of Brent and WTI crude oil futures.

The shutdown of the Colonial Pipeline provoked serious disruptions in the supply of petroleum products. As a result, the work of many airports and air carriers has been restricted, and a state of emergency has been introduced in the state of Florida. Airline shares are losing value.

What else to read about oil on the R Blog?

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