Oil prices slide as US refiners cut output

Melbourne — Oil prices fell on Tuesday as the prospect of the main US east coast fuel pipeline remaining shut for the rest of this week led some US Gulf Coast refiners to cut output, denting their appetite for crude.

US West Texas Intermediate (WTI) crude futures fell 40c, or 0.6%, to $64.52 a barrel at 2.47am GMT, after gaining 2c on Monday. Brent crude futures dropped 45c, or 0.7%, to $67.87 a barrel, after climbing 4c on Monday.

Colonial Pipeline, which transports more than 2.5-million barrels a day of petrol, diesel and jet fuel, shut down its network on Friday after being hit by a cyberattack.

“It’s quite possible we’ll see reduced crude oil demand. Some refineries in Texas have already scaled back runs because of the pipeline being out,” said Lachlan Shaw, National Australia Bank’s head of commodity research.

“That will weigh on crude oil prices pretty obviously, even though parts of the pipeline are restarting and Colonial is expecting the pipeline to be back to capacity by the weekend.”

Colonial said on Monday it aims to resume full operations by the end of this week. The outage, however, has already led Motiva Enterprises to shut two of three crude units at its Port Arthur refinery in Texas, the largest in the US.

Total also cut petrol output on Monday at its Port Arthur refinery due to the pipeline outage.

The benchmark US petrol futures contract, which spiked after the outage, has now retreated to pre-Friday levels on the prospect of the restart. On Tuesday, the contract was down 0.6% at $2.1212 a gallon.

On the positive side for crude, analysts are expecting data to show US crude inventories fell by about 2.3-million barrels in the week to May 7, after an 8-million-barrel drop the previous week, according to a Reuters poll.

Petrol stocks are expected to have fallen by about 400,000 barrels, six analysts estimated on average ahead of reports from the American Petroleum Institute industry group on Tuesday and the US Energy Information Administration on Wednesday.

Reuters