(Bloomberg) -- Crude oil jumped and U.S. gasoline futures hit a two-year high after a cyberattack put the nation’s largest oil-products pipeline out of action.
West Texas Intermediate in New York rose as much as 1%, while gasoline rallied 4.2% to the highest level since May 2018 before paring gains. Colonial Pipeline Co., a key supplier of gasoline, diesel and jet fuel to the eastern half of the U.S., halted operations late Friday, and said Sunday that it is still developing a plan for restarting the key artery. A rush for replacement fuels could emerge, leading traders to source cargoes from Europe and Asia.
Oil prices have gained more than 30% this year as the rapid roll-out of vaccines across the U.S. and Europe prompts the lifting of social-distancing measures and travel restrictions. Consumption of fuels such as gasoline and jet fuel has been on the mend as millions of people return to work, boosting personal mobility and the use of cars and supporting domestic and international travel.
The Colonial network is the main source of gasoline, diesel and jet fuel for the East Coast, with capacity of about 2.5 million barrels a day on its system from Houston as far as North Carolina, and another 900,000 barrels to New York. Gasoline stockpiles have hovered near a four-month low since early March, while diesel inventories are just above the five-year average for this time of the year
Traders and fuel shippers are seeking vessels to deliver gasoline that would have otherwise been shipped on the Colonial Pipeline system, according to people familiar with the matter. Others are securing tankers to temporarily store gasoline in the U.S. Gulf in the event of a prolonged shutdown, they said, asking not to be identified because the information isn’t public.
Even before Colonial’s system was forced offline, gasoline had rebounded strongly this year on rising demand from motorists. U.S. refiners were ramping up output for summer demand, with the biggest spike expected at the start of the Memorial Day holiday on May 31, a three-day weekend for most Americans.
The hackers who caused Colonial Pipeline to shut down began their blitz against the company last Thursday, stealing a large amount of data before locking computers with ransomware and demanding payment, according to people familiar with the matter.
Companies behind pipeline and power grids are vulnerable to cyber attacks due to digitalization and the use of more so-called smart applications. Moving from manual to automatic controls increases the connectedness of systems public and private networks, but leaves them susceptible to attacks.
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