Oil gains after cyberattack forces shutdown of crucial U.S. pipelines
10 May 2021
TOKYO: Crude prices rose on Monday after a major cyberattack forced the shutdown of critical fuel supply pipelines in the United States and highlighted the fragility of its oil infrastructure.
Brent crude was up by 57 cents, or 0.8 per cent, at $68.85 a barrel by 0645 GMT, having risen by l.5 per cent last week. U.S. West Texas Intermediate futures rose by 51 cents, or 0.8 per cent, at $65.41 a barrel, after gaining more than 2 per cent last week.
Signalling the seriousness of the situation, the White House was working closely with Colonial Pipeline to help it recover from the ransomware attack, which forced the biggest U.S. fuel pipeline operator to shut a network supplying populous eastern states.
“The major takeaway is the bad guys are very adept at finding new ways to penetrate infrastructure,” Andrew Lipow, president of Lipow Oil Associates told Reuters. “Infrastructure has not developed defences that can offset all the different ways that malware can infect one’s system.”
Colonial’s network is the source of nearly half of the U.S. East Coast’s fuel supply, transporting 2.5 million barrels per day of gasoline and other fuels, and the company had to shut all its pipelines after the cyber attack on Friday, which involved ransomware.
U.S. gasoline prices jumped nearly 2 per cent on Monday, while heating oil was up by more than 1 per cent.
It was not clear who carried out the attack, but sources told Reuters the hackers were likely a professional cybercriminal group.
Colonial said on Sunday its main fuel lines remain offline but some smaller lines between terminals and delivery points are now operational. It didn’t say when the network might return to full operational capacity.
A prolonged shutdown of the line, described as the “jugular of infrastructure” in the United States by one analyst, would cause retail prices to spike at gasoline pumps ahead of peak summer driving season, a potential blow to U.S. consumers and the economy.
“We expect the pipeline to restart in a few days, and therefore have a limited impact on refineries in Louisiana and eastern Texas having to cut runs,” said Energy Aspects analyst Virendra Chauhan, noting also that U.S. fuel inventories are “comfortable.”
The attack has prompted calls from American lawmakers to strengthen protections for critical U.S. energy infrastructure from hacking attacks.
The Department of Energy said it was monitoring potential impacts to the nation’s energy supply, while the U.S. Cybersecurity and Infrastructure Security Agency and the Transportation Security Administration told Reuters they were working on the situation.
“We see the global oil market deficit, currently around 1 MB/D widen significantly from here,” Goldman analysts said in a note.
“We still expect oil demand to reach 100 MB/D by the end of this year,” they said.