News impacting the oil market May 3-9

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On May 8 Reuters reported top U.S. fuel pipeline operator Colonial Pipeline has shut its entire network, which supplies fuel from U.S refiners on the Gulf Coast to the eastern and southern United States, after a cyber attack that industry sources said was caused by ransomware. The company transports 2.5 million b/d of gasoline, diesel, jet fuel and other refined products through 5,500 miles of pipelines, and transports 45% of East Coast fuel supply. Colonial shut down systems to contain the threat after learning of the attack on Friday, it said in a statement. That action has temporarily halted operations and affected some of its IT systems, the company said. While the U.S. government investigation is in its early stages, one former U.S. government official and two industry sources said the hackers are most likely a highly professional cybercriminal group.

Investigators are looking into whether a group dubbed "DarkSide" by the cybersecurity research community is responsible. DarkSide is known for deploying ransomware and extorting victims, while selectively avoiding targets in post-Soviet states. The malicious software used in the attack was ransomware, two cybersecurity industry sources familiar with the matter said. Ransomware is a type of malware that is designed to lock down systems by encrypting data and demanding payment to regain access. The malware has grown in popularity over the last five years. Cybersecurity company FireEye (FEYE.O-NC) has been brought in to respond to the attack, the cybersecurity industry sources said. FireEye declined to comment when asked if it was working on the incident. Colonial did not give further details or say for how long its pipelines would be shut.

If the Colonial Pipeline is shutdown for more than a few days, there may be gasoline and diesel shortages in many East Coast cities. Except for the Covid problems in India, the rest of the news below is bullish for oil.

On May 7 Reuters reported Enbridge Inc. (ENB-NC) will continue to operate its Line 5 despite an order from the state of Michigan to shut down the crude oil pipeline next week, Chief Executive Al Monaco said on Friday. Enbridge has been locked in a long-running battle with Michigan over Line 5, which ships 540,0000 b/d from Wisconsin to Sarnia, Ontario, and is a crucial link in Enbridge's crude export network. Environmental campaigners say there is a risk a 4-mile underwater section of the 68-year-old pipeline could leak into the Great Lakes. Michigan Governor Gretchen Whitmer last year revoked the pipeline's easement, or permission to operate, and ordered it to shut down no later than May 12. Enbridge is challenging Michigan's order in federal court. The two parties have started mediation and Monaco said he did not expect any imminent court ruling. The next round of mediation will take place on May 18.

On May 7 IHS Markit reported that China’s services PMI index rose to 56.3 in April vs March’s mark of 54.3.

On May 7 Bloomberg reported that France’s industrial output rose by 0.8% in March vs. February levels (up 13.7% year over year), according to its national statistics bureau INSEE. This is lower than the expectations of 2% month over month rise.

On May 5 Platts reported that the Port of New York and New Jersey posted its highest-ever monthly container volume in March as imports surged while also drawing cargoes away from congested U.S. West Coast ports, according to the Port Authority. Total throughput was 789,776 twenty-foot equivalent units (TEUs) in March (up 41% year over year), beating the previous monthly record from October 2020 by 34,339 TEUs.

On May 5 Platts reported that India's driving activity has nosedived to the lowest level in a year in early May, while commercial and passenger vehicle sales tumbled in April, casting a shadow over the country's gasoline sales and demand outlook. Driving activity in India was 46% below baseline levels on May 2, which is a sharp fall from almost 100% above baseline levels in mid-March, according to mobility data from Apple. Retail sales of gasoline had already hit a multi-month low in April as sales were down 7-10% vs. March, according to multiple industry sources with close knowledge of the data.