Oil prices fell on Tuesday as fears of prolonged outage of the largest U.S. fuel pipeline system, Colonial Pipeline, faded, while some U.S. Gulf Coast refiners cut output.
U.S. West Texas Intermediate (WTI) crude futures fell 32 cents, or 0.47%, to $64.55 a barrel.
“The rally in oil prices was short-lived as the Colonial Pipeline disruption seems it will not have a prolonged impact,” Edward Moya, senior market analyst at OANDA, said in a Tuesday note.
The U.S. gasoline futures contract and U.S. heating oil futures, which spiked after the outage, have retreated to pre-Friday levels on the prospect of the restart.
Colonial Pipeline, which transports more than 2.5 million barrels per day (bpd) of gasoline, diesel and jet fuel, shut down its network on Friday after being hit by a cyberattack.
The privately owned company said on Monday it was working on restarting in phases with “the goal of substantially restoring operational service by the end of the week.”
It has begun manually operating its 700,000-barrel-per-day multi-product fuel line between Greensboro, North Carolina, and Maryland for a limited time using existing inventories.
The outage, however, has already led Motiva Enterprises LLC to shut two of three crude units at its 607,000 bpd Port Arthur refinery in Texas, the largest in the United States.
Total SE also cut gasoline output on Monday at its 225,500 bpd Port Arthur refinery because of the pipeline outage.
“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.
Meanwhile, sentiment is weighed down by the rapid spread of coronavirus infections in India, which has increased calls for the government of Prime Minister Narendra Modi to lock down the world’s second-most populous country.
The World Health Organization has classified the coronavirus variant first identified in India last year as one of global concern, with some preliminary studies showing that it spreads more easily.
On the positive side for crude, analysts are expecting data to show U.S. crude inventories fell by about 2.3 million barrels in the week to May 7, following an 8 million-barrel drop the previous week, according to a Reuters poll.
Gasoline 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 U.S. Energy Information Administration on Wednesday.
OPEC is also expected to publish its monthly oil market report on Tuesday, which will include April production numbers.