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The Colonial Pipeline computer system shippers use to communicate with the pipeline operator is operating once again after being down Tuesday morning and afternoon, the company has told OPIS.
"Colonial has restored service to our nominations system, and customers can once again place nominations," a company spokeswoman said in a statement.
Markets had become jittery after Colonial issued a shippers bulletin Tuesday morning warning it was "experiencing network issues impacting customers' ability to enter and update nominations."
The warning came as markets are still recovering from disruptions caused after the pipeline was shut for six days last week due to a ransomware cyberattack.
The pipeline company said in an earlier statement Tuesday the server running its nomination system experienced intermittent disruptions Tuesday morning "due to some hardening efforts that are ongoing and part of our restoration process."
"These issues were not related to the ransomware or any type of reinfection," the company said. The company said it had continued to deliver refined products as nominated by shippers.
Shippers contacted by OPIS earlier Tuesday had said that only phone orders were being taken by Colonial.
On Monday evening, Colonial announced fuel supply along the 5,500-mile pipeline was back to flowing at normal rates, but warned it would take time for terminals, wholesalers and retailers to bring operations backs to normal levels.
The 2.5-million-b/d pipeline supplies about 45% of the East Coast's fuel supply, and the May 7-12 outage led to panic-buying and gas station closures in Southeastern states.
The situation Tuesday did not seem to be having a significant impact on markets, with prices in cash markets around the country advancing a handful of points in keeping with gains in ULSD and RBOB contracts being seen in futures
markets.
--Reporting by Steve Cronin, scronin@opisnet.com; Rachel Stroud-Goodrich, rstroud-goodrich@opisnet.com
--Editing by Beth Heinsohn, bheinsohn@opisnet.com
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Shippers on Colonial Pipeline are reporting that the computer system they use to communicate with the pipeline operator is down Tuesday morning, raising fears of additional system disruptions even as the pipeline appears to be
recovering from a ransomware cyberattack.
Shippers contacted by OPIS said that only phone orders were being taken by Colonial, with one source saying the company's computer system is being scoured before further use.
Colonial Pipeline said in a shippers bulletin it was "experiencing network issues impacting customers' ability to enter and update nominations."
"Our internal IT department is aware of the situation and working diligently to restore service," the message said.
In a separate tweet, the pipeline said the server running its nomination system experienced intermittent disruptions Tuesday morning "due to some hardening efforts that are ongoing and part of our restoration process."
"These issues were not related to the ransomware or any type of reinfection," the company said.
The situation comes as markets are recovering from disruptions caused by the six-day shutdown that interrupted service on the pipeline and led to gas shortages throughout Southeastern states. On Monday evening, Colonial had
announced fuel supply along the 5,500-mile pipeline was back to flowing at normal rates, but warned it would take time for terminals, wholesalers and retailers to bring operations backs to normal levels.
The 2.5-million-b/d pipeline supplies about 45% of the East Coast's fuel supply, and the May 7-12 outage led to panic-buying and gas station closures in Southeastern states.
The situation Tuesday did not seem to be having a significant impact on markets, with prices in cash markets around the country advancing a handful of points in keeping with gains in ULSD and RBOB contracts being seen in futures
markets.
--Reporting by Steve Cronin, scronin@opisnet.com; Rachel Stroud-Goodrich, rstroud-goodrich@opisnet.com
--Editing by Beth Heinsohn, bheinsohn@opisnet.com
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Colonial Pipeline Co. is now moving fuels at normal rates as the largest U.S. refined product pipeline system is now fully operational, but the company expects it will take time for terminals, wholesalers and retailers to catch up after a six-day outage due to a cyberattack.
"We can now report that we are transporting refined products (gasoline, diesel and jet fuel) at normal levels and are fully operational. It will take some time for the fuel supply chain to fully catch-up," the Alpharetta, Georgia-based company said in a statement late Monday.
Colonial said it continued to make substantial progress in moving products throughout its 5,500-mile pipeline system.
When a gallon of gasoline is injected into Line 1 in Pasadena, Texas, its origin, it takes about 18-21 days traveling at a rate of four miles per hour to reach its endpoint at Linden, New Jersey, the company said in its website.
As of Monday, OPIS noted that supply issues persisted in Southeastern markets several days after Colonial Pipeline restarted its lines, while some other markets saw significantly higher sales due to panic buying.
--Reporting by Frank Tang, ftang@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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Colonial Pipeline has started to accept nomination changes from shippers for its entire pipeline system, a key step allowing shippers to schedule deliveries to resupply the most depleted markets after a six-day outage.
In a shipping bulletin sent Saturday afternoon, Colonial Pipeline said shippers can make nomination changes for all lines. Those changes will be accepted only through the Transport4 communications software system, it said.
"We understand shippers will make significant changes to their current nominations following the recent downtime. Colonial will resume the normal nomination and scheduling process as outlined in the Shipper Manual on Monday
May 17," said the Alpharetta, Georgia-based pipeline operator.
Nominations are essentially shippers' request for space to ship products to a destination from an original location.
As of early Monday, a major customer of the largest U.S. refined products pipeline told OPIS that it can now schedule all of its offline barrels to needed terminals after Colonial Pipeline reactivated its system over the weekend.
"We had no issues at this time. The good news is that the system appears to be working now so they are starting to work out their kinks and put things back into place," the major customer said early Monday.
OPIS notes that shippers often initially designate Linden, New Jersey, as the destination of their deliveries because they can normally make nomination changes later to redirect barrels to other markets. Linden is the endpoint of the 5,500-mile line that starts in Houston.
As recently as late Friday, however, there were fears among shippers that "hundreds of thousands" of barrels designated for Linden prior to Colonial's outage would end up in New Jersey, creating potential tankage issues in the
Northeast. At the same, Southeast terminals would not receive much-needed supplies.
This is because Colonial had not been able to accept changes in its nomination system, by email or phone until Saturday evening. That's most likely because the cyberattack this month affected Colonial's scheduling system, and the company had manually run some of its pipelines immediately following the restart.
As of Monday, OPIS notes that there are still supply issues in Southeastern markets several days after Colonial Pipeline restarted its lines, while some other markets saw significantly higher sales due to panic buying.
--Reporting by Frank Tang, ftang@opisnet.com
--Editing by Barbara Chuck, bchuck@opisnet.com
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Data released by the U.S. Energy Information Administration (EIA) Wednesday will not get the usual scrutiny, but it serves as a baseline for what prevailed in supply and demand before the unprecedented suspension of Colonial Pipeline pumping.
Gasoline demand, for example, was a neutral 8.8 million b/d, reflecting a small 64,000-b/d drop from the previous week. Various OPIS sentinels believe that next week's demand number will be hundreds of thousands of b/d higher,
reflecting panic buying in more than a dozen states and dry terminals from Alabama north to Virginia.
Gasoline imports tilted back under 1 million b/d last week, but that will also be a data series that moves appreciably higher, perhaps in EIA reports that are issued in late May. Ex-ports of gasoline tilted higher to 994,000 b/d last week, and that number may climb as well as Gulf Coast refiners move excess product at the refinery gate offshore.
The most salient number in the report came via a total demand reading of just 17.483 million b/d for all petroleum products. That reflected a serious demand drop of 2.2 million b/d. However, most of the decline came in the often
mysterious and capricious category of "other oils." Demand for those unnamed hydrocarbons was down 1.557 million b/d.
Another highlight was a drop of 1 million bbl in ethanol inventory.
The snapshot of refinery operations ahead of the Colonial outage shows Northeastern processors running only about 634,000 b/d of crude. That number may rise, given the demand for barrels generated at northern ends of the downed pipeline. Nationally, the U.S. was able to produce about 9.58 million b/d of gasoline, but when nearly 1 million bbl is sent offshore, it suggests that next week will see a huge drawdown in motor fuel stocks.
Distillate data was quite neutral. Output picked up to 4.655 million b/d, but the export market provided an outlet for 1.143 million b/d of that production.
Distillate stocks fell by 1.8 million bbl despite the arrival of about 1.4 million bbl in offshore supply.
Again, this report represents data before one of the biggest disruptions of the 21st century. Next week's statistics will be scrutinized heavily.
--Reporting by Tom Kloza, tkloza@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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Marketers from Alabama through Georgia and up the East Coast to Virginia report much better luck in getting supplies of gasoline and diesel at Colonial terminals on the main line, but spur terminals off that line appear to be the laggards.
Bainbridge, Georgia, for example is at the end of a spur line that includes Albany, North Albany, and South Macon in the state, and it has been tapped hard by Florida panhandle jobbers looking for supply. Earlier this week, some
stations in Tallahassee and other points in northwest Florida were getting their supply from Tampa and Jacksonville. The Florida peninsula is not supplied by the Colonial Pipeline of course, but hysterical buying spread to southern
counties such as Lee, Collier, Dade, Broward, and Palm Beach.
In North Carolina, the most prominent supply problems persist for Fayetteville, Apex, and Selma, with gasoline and diesel at those locations hand-to-mouth. Greensboro is noted for the huge amount of breakout storage that Colonial has on acreage there, but virtually none of those storage tanks have racks or the capability of loading transport trucks.
The Hampton Roads and Norfolk areas of Virginia represented a severe supply problem earlier in the week but suppliers now report an intermittent but much steadier flow of fuel.
Surprisingly, Tennessee didn't have the usual crisis issues associated with tight supply at terminals in Chattanooga, Knoxville, and Nashville. Outages in the eastern counties of the state were nowhere near as dire as in neighboring
states to the south and east. But the spur line that serves the fast-growing Tennessee market is still viewed as a potential sore spot down the road.
At the Houston/Pasadena source of the Colonial Pipeline, meanwhile, things are quiet. CBOB is offered at 14.25cts/gal off June futures, which results in a $1.96/gal spot price at press time.
--Reporting by Tom Kloza, tkloza@opisnet.com
--Editing by Beth Heinsohn, bheinsohn@opisnet.com
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Colonial Pipeline said Thursday afternoon it has restarted its entire pipeline system and that it has begun delivering refined products to all markets it serves.
"Following this restart, it will take several days for the product delivery supply chain to return to normal. Some markets served by Colonial Pipeline may experience, or continue to experience, intermittent service interruptions
during this start-up period," the Alpharetta, Georgia-based company said in a statement Thursday at 4:40 p.m. ET.
"Colonial will move as much gasoline, diesel, and jet fuel as is safely possible and will continue to do so until markets return to normal," it said.
Sources told OPIS Thursday that overall fuel supply is improving in the Southeast, particularly in Virginia and the Carolinas. OPIS notes that almost all fuel companies in Georgia, including Atlanta, that had run out of gasoline at some point is now seeing some restored supplies.
However, the spur terminals in Selma and Fayetteville in North Carolina as well as Fredericksburg, Virginia appeared to be the sore spots, sources said.
Earlier Thursday, the operator of the largest U.S. refined product pipeline system had said certain segments, including Line 4 between Greensboro, North Carolina and Dorsey in Central Maryland, as well as smaller spur lines near Baltimore, Maryland and Selma, North Carolina would be operational by midday Thursday.
In a Transport4 shipping bulletin sent Thursday afternoon, the company said its schedulers have been contacting shippers to communicate deliveries and volumes.
While the system is about 5.5 days behind the current scheduled times in Transport4, certain line segments that were operated manually during the downtime may be delayed by a shorter time, Colonial Pipeline said.
The company said it will not currently accept nomination changes, and shippers may not submit changes by email or phone.
Colonial said the restoration process for its business systems will require a staggered startup, with its ticketing systems to be restored first, followed by its inventory and scheduling systems. Once those steps are completed, Colonial schedulers will update schedules to bring them into synchronization with its current operations, the company said.
Nomination changes will be allowed for all events that are scheduled more than 24 hours from the new posted schedule time, Colonial said.
"Our current expectation is that the necessary business systems will be returned by Friday afternoon, May 14, to begin the restoration process," the company said in the bulletin.
--Reporting by Frank Tang, ftang@opisnet.com
--Editing by Andrew Atwal, aatwal@opisnet.com
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The U.S. Department of Homeland Security (DHS) late Wednesday granted a Jones Act waiver in response to supply issues related to the Colonial Pipeline outage.
"In the interest of national defense, I have approved a temporary and targeted waiver request to an individual company," said Secretary of Homeland Security Alejandro Mayorkas in a press release.
The U.S. Transportation Department earlier in the week said it had begun to examine Jones Act waivers in the wake of the pipeline outage. This week's waiver was made in consultation between the Departments of Transportation,
Energy and Defense.
The Jones Act requires shipments between U.S. ports to be performed by ships built, operated and owned by U.S. citizens.
DHS in 2017 approved a Jones Act waiver after Hurricanes Harvey and Irma disrupted fuel distribution in Southeastern states.
On Thursday, ship brokers reported a fixture for a 38,000-mt unleaded gasoline cargo loading in the U.S. Gulf and discharging on the U.S. Atlantic Coast with a laycan date of May 17. The reported tanker was the Maltese-registered Agioi Fanendes, which is owned by the Athens, Greece-based Eastern Mediterranean Maritime Ltd. company. The charterer was reported as George E. Warren Corporation.
The Agioi Fanendes earlier this week discharged a gasoline cargo from France at the Port of Providence in Rhode Island, according to IHS Markit's Market Intelligence Network (MINT) ship tracking data. The tanker was originally signally a destination for the Linden City terminal in New York Harbor but on May 9 switched to Providence, according to MINT.
IHS Markit PIERS customs data year to date show George E. Warren has imported product mostly to New York Harbor, with a few cargoes that have landed in Houston and another in Paulsboro, New Jersey.
--Reporting by Eric Wieser, eric.wieser@ihsmarkit.com
--Editing by Tom Sosnowski, thomas.sosnowski@ihsmarkit.com
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Space on Colonial Pipeline's main gasoline line traded at its highest point in more than a year as operations on the pipeline system resume after an outage since Friday.
Capacity on Colonial Pipeline Line 1 traded in the morning hours on Thursday at 1ct over pipeline tariff rates, the highest value for space on Line 1 since February 2020, according to OPIS data.
Colonial Pipeline's main lines for gasoline and distillates, Lines 1 and 2, shut down on Friday due to a cyberattack. Colonial began a restart of the pipelines on Wednesday afternoon, and product delivery had begun in most markets by Thursday morning. Deliveries should resume to all markets by the middle of the day, the company said in a statement Thursday morning.
The Colonial Pipeline carries refined products from the Houston area through the Southeast and into the New York markets, transporting more than 2 million b/d.
With the pipeline outage, Gulf Coast refiners employed a variety of measures to compensate for the lack of access to the country's largest refined products pipelines. Those methods included reductions in run rates, booking tankers as
short-term storage, efforts to increase waterborne exports and shipments on the Plantation Pipeline that runs from Louisiana to Virginia.
The line space deal in the morning traded capacity on Line 1 for Cycle 29, which will face a scheduling deadline at the end of the session, according to the latest shipping schedule.
Spot prices for U.S. Gulf Coast gasoline Cycle 29 products declined by more than a nickel in the morning hours on Thursday, with the drops pulling some levels off two-month highs.
CBOB (9-lb. RVP "A2") implied prices fell nearly 5.50cts to sink back under the $2/gal level, down to around $1.96/gal at about 11:30 a.m. ET.
RBOB (7.4-lb. RVP "F1") slid almost 6cts to around $2.04/gal, and conventional gasoline (9-lb. RVP "M2") dropped about 5.50cts to around $2.03/gal, with those marks falling from their highest levels since March.
--Reporting by Justin Schneewind, jschneewind@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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The U.S. Internal Revenue Service (IRS) said early Thursday it will not impose a penalty when dyed diesel fuel is sold for use or used on the highway in areas affected by Colonial Pipeline's six-day outage.
The IRS said the relief will apply to the states of Alabama, Delaware, Georgia, Florida, Louisiana, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, and the District of Columbia because of disruptions of the fuel supply chain there.
The IRS said that the relief is retroactive to May 7 and will remain in effect through May 21.
"The IRS is closely monitoring the situation and will provide additional relief as needed," it said in a statement posted on its website.
Dyed diesel is regular diesel that has red dye added to it to identify the fuel as non-taxed and to help enforcement officials easily identify it. Dyed diesel is for off-road use such as for farming purposes, for home heating use, and for
local governments, which is why it is not ordinarily taxed according to federal tax codes.
The IRS said that in the case dyed diesel fuel is used, the relief is available only if the operator of the vehicle or the person selling such fuel pays the federal tax of 24.4cts/gal that is normally applied to diesel fuel for highway use.
The IRS said it will not impose penalties for failure to make semimonthly deposits of this tax, as instructed in IRS Publication 510, Excise Taxes.
The U.S. federal government has implemented a series of measures to help alleviate a supply crunch and to provide relief amid the outage of Colonial Pipeline which normally supplies 45% of the fuel needs to the U.S. East Coast.
Earlier this week, the EPA has waived low-volatility RVP gasoline requirements for both conventional and reformulated gasoline in designated states, and the Department of Transportation has waived restrictions on weight, hours of service, and it has investigated a temporary and targeted waiver of the Jones Act to allow shipborne transfers of fuel between U.S. ports by foreign-flagged vessels.
The pipeline, which was shut due to a cyberattack, resumed operations on Wednesday, though it is likely to take several days for fuel supply to return to normal.
--Reporting by Frank Tang, ftang@opisnet.com
--Editing by Steve Cronin, scronin@opisnet.com
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Colonial Pipeline said early Thursday it has made "substantial progress" in restarting the largest U.S. refined product pipeline system and that product delivery has begun in most markets, and the company now expects each of the
markets it serves will receive products by midday Thursday.
A system restart update map accompanying the online statement shows that segments that are expected to be operational by midday Thursday include a portion of Colonial's main lines near Birmingham, Alabama, Line 4 between Greensboro, North Carolina and Dorsey in Central Maryland, as well as smaller spur line near Baltimore, Maryland and Selma, North Carolina.
The Alpharetta, Georgia-based company's latest announcement came a day after Colonial said it initiated a restart of pipeline operations around 5:00 p.m. ET Wednesday, following a six-day outage that has roiled Southeastern gasoline markets and called attention to the vulnerability of the United States' energy infrastructure.
U.S. refined product futures dived on the latest Colonial news. At 9:34 a.m. ET, NYMEX June RBOB gasoline futures tumbled 5.30cts/gal, to $2.1080/gal on CME Globex, and June ultra-low-sulfur diesel was down 5.40cts/gal, at $2.0155/gal.
--Reporting by Frank Tang, ftang@opisnet.com
--Editing by Cory Wilchek, cwilchek@opisnet.com
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U.S. Gulf Coast (USGC) refiners facing pressure to cut run rates are likely to face limited relief via the waterborne market as Pemex has a limited appetite for cargoes and the U.S. government flexibility into easing restriction on the usage of foreign vessels between domestic ports is limited, sources told OPIS.
In a Wednesday press statement, White House spokeswoman Jen Psaki said the Biden administration would review waiver requests on a case-by-case basis amid the shutdown of the 2.5-million-b/d Colonial Pipeline after a cyber ramson attack on Friday.
The number of waivers granted is likely to be fairly limited, said Debnil Chowdhury, IHS Markit executive director of Americas refining and marketing based in Houston. OPIS is an IHS Markit subsidiary.
Waterborne shipments into the East Coast are a limited option while Mexico and Latin America cannot absorb all of the Colonial Pipeline barrels, he added.
If waivers are approved, ships set to Mexico and other foreign markets could be diverted to supply the U.S. Atlantic Coast, he added.
USGC fuel prices will see downward pressure until the pipeline is entirely back online next week, said Chowdhury, adding that USGC prices have to come down to incentivize the usage of vessels as storage tanks or incentivize foreign buyers to take on additional cargoes.
Freight rates for the USGC-East Coast Mexico freight rate shot up to an OPIS assessed $625,000 for a medium-range vessel on Wednesday. This is more than twice the rate assessed on Friday.
The Colonial Pipeline shutdown is expected to cut USGC refinery run rates by 700,000 to 1 million b/d, IHS Markit forecasts. "If they don't do this, (fuel) inventories will build quickly here," Chowdhury added.
OPIS heard from market sources that refiners like Motiva and CITGO are offering good pricing to foreign buyers like Pemex to limit the cuts in its refinery runs.
The state company has its demand needs covered for the remainder of the month, and it is unlikely to contract additional cargoes, a source aware of Pemex operations said.
Mexico is also ready to start its 285,000-b/d Minatitlan refinery, limiting appetite for additional cargoes, the source added.
The companies that could take the most advantage of the export market are companies like ExxonMobil, Valero Energy and Koch Supply & Trading, said a trader close to the Mexican market, adding these are some of the companies with access to import infrastructure in Mexico.
A Mexican fuel distributor told OPIS that U.S. refineries hadn't made significant price cuts to move more products out of their racks in Mexico, adding that only Koch has reduced its prices by 0.1 pesos per liter.
--Reporting by Daniel Rodriguez, drodriguez@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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Line space on Colonial Pipeline Line 1, the main gasoline line, reached positive territory for the first time in more than a year with stronger buying levels amid the shutdown.
Firmer bid levels pushed Line 1 space to 0.10cts over tariff rates on Wednesday, up a tenth of a cent from the previous session and the first time at a premium to pipeline costs since February 2020, according to OPIS data. Offers have been scarce recently with the lines down, sources said.
Colonial Pipeline's main lines for gasoline and distillates, Lines 1 and 2, have been down since Friday due to a cyberattack. Colonial began a restart of the pipelines on Wednesday afternoon, the company said.
"Colonial will move as much gasoline, diesel, and jet fuel as is safely possible and will continue to do so until markets return to normal," the company said.
Gulf Coast gasoline have trended upward since Friday despite the logistical hurdles posted by the pipeline outage, with some grades hitting two-month highs on Wednesday.
RBOB (7.4-lb. RVP "F1") mean prices rose 1.49cts, to $2.0998/gal, the strongest in two months and about 2.50cts higher than Friday.
Conventional gasoline (9-lb. RVP "M2") mean prices gained 2.24cts to a two-month high of $2.0860/gal, a gain of more than 4cts from Friday. CBOB (9-lb. RVP "A2") rose 1.74cts, to $2.0160/gal, just shy of a two-month high but up more than 3cts from Friday.
--Reporting by Justin Schneewind, jschneewind@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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Colonial Pipeline restarted operations Wednesday evening after a six-day outage that has roiled Southeastern gasoline markets and called attention to the vulnerability of the United States' energy infrastructure.
In a statement posted on its website, Colonial said it initiated restart of pipeline operations at 5 p.m. ET.
"Following this restart, it will take several days for the product delivery supply chain to return to normal," the statement warned. It also said some markets may experience, or continue to experience, intermittent service interruptions during the start-up period.
The company said it would move as much gasoline, diesel and jet fuel "as is safely possible and will continue to do so until markets return to normal."
The pipeline has been shut since Friday, as the company was the target of an attack by ransomware created by the DarkSide hacking group. The 2.5 million-b/d pipeline supplies about 45% of the East Coast's fuel supply, and the outage led to panic buying and gas station closures in Southeastern states.
Governors in several states declared states of emergency, and the Biden administration mobilized federal efforts in an attempt to keep supplies flowing to affected areas.
OPIS data show that several Southeastern states saw retail gasoline prices increase from 15cts/gal to more than 20cts/gal since the attack began.
--Reporting by Steve Cronin, scronin@opisnet.com
--Editing by Barbara Chuck, bchuck@opisnet.com
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ExxonMobil has issued a brand waiver allowing Exxon and Mobil stations to buy fuel from other sources and sell it under its branded canopies because of the supply crisis created by the Colonial Pipeline shutdown, OPIS has confirmed.
The waiver applies in select markets where inventories are tight, and stations must post signs carrying a disclaimer that the fuel does not contain ExxonMobil's proprietary additives, sources said.
On its website, the oil major states that Exxon and Mobil Synergy gasoline contains "significantly higher quantities of detergents than required by the Environmental Protection Agency and has passed key performance tests resulting in it being certified Top Tier."
Top Tier is recommended by several of the world's largest automakers in their vehicles' owner manuals.
The brand waiver is unusual and only allowed due to the severity of the crisis, OPIS was told. No other brands have issued similar waivers at this time, sources said. Normally, selling fuel from other sources at branded stations would violate the terms of branded supply agreements.
On Wednesday, a multi-brand jobber said in some areas there are more stations without fuel than with fuel.
--Reporting by Donna Harris, dharris@opisnet.com
--Reporting by Tom Kloza, tkloza@opisnet.com
--Editing by Frank Tang, ftang@opisnet.com
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Maryland on Wednesday issued waivers of weight restrictions and hours of service requirements, making it the latest southeastern state to take such steps in response to fuel shortages caused by the ongoing Colonial Pipeline shutdown.
In a statement, Gov. Larry Hogan said the easing of state restrictions is consistent with moves already taken by the U.S. Department of Transportation.
"The emergency actions that we are taking will provide the state the flexibility it needs to address any disruption in fuel supply," Hogan said. The governor said that the supply chain is still working, if slowly, and encouraged state residents to avoid panic buying of fuel.
Governors in Virginia, North Carolina, Georgia and Florida have already issued states of emergency due to the Colonial shutdown, with those declarations allowing state officials to waive similar trucking regulations in order to speed deliveries. South Carolina Gov. Henry McMaster said Tuesday that because the state was already under a state of emergency, transportation waivers and price gouging laws are in effect.
The 2.5 million-b/d pipeline delivers about 45% of the liquid fuel used on the East Coast. The shutdown has primarily impacted fuel supplies in the Southeast, with OPIS reporting stations in those states seeing large surges in sales while some are having difficulty maintaining supply.
The pipeline shut down Friday after Colonial was struck by a ransomware cyberattack. Colonial employees have been manually operating segments of the pipeline system to deliver fuel supplies, and company officials have said they expect to substantially restore service by week's end. The company is expected to provide an update on its restart plans later today.
-- Reporting by Steve Cronin, scronin@opisnet.com
--Editing by Frank Tang, ftang@opisnet.com
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The cyberattack that has shut down the Colonial Pipeline since Friday and led to price spikes and fuel shortages in the U.S. Southeast is leading government officials to call for greater regulation to ensure pipeline security.
Richard Glick, chairman of the Federal Energy Regulatory Commission, and agency Commissioner Allison Clements said the attack "is a stark reminder" that the U.S. government needs to take a more hands-on approach to pipeline security.
In a statement, Glick said that while there are mandatory cybersecurity standards for bulk electric systems, there are no similar regulations for the United States' oil, natural gas and hazardous liquid pipelines.
"It is time to establish mandatory pipeline cybersecurity standards similar to those applicable to the electricity sector. Simply encouraging pipelines to voluntarily adopt best practices is an inadequate response to the ever-increasing number and sophistication of malevolent cyber actors," Glick said. "Mandatory pipeline security standards are necessary to protect the infrastructure on which we all depend."
Speaking on CNBC on Wednesday, Senate Intelligence Committee Chairman Mark Warner (D-Va.) called for regulation requiring companies report cyberattacks when they are detected.
He said such real-time reporting requirements are necessary so government and industry can work together on a "full-fledged response" to an intrusion. "We need a real-time reaction team, and unfortunately we don't have that now," he said. Mandatory reporting requirements would likely have some kind of provision limiting liability for companies that notify authorities of crimes, he said.
Warner said the discovery of the SolarWinds espionage attack last year, which involved 18,000 companies, shows how broadly cyberattacks can hit private companies.
"We see the effect of this ransomware attack against one pipeline," Warner said. ""Let's imagine what would happen if we combined -- if suddenly you had somebody shutting down 18,000 companies across our economy. We would come to a grinding halt."
The Colonial Pipeline attack has raised the profile of cybercrime, and Warner said the problem is widespread and growing.
"The number of companies that are getting hit on a regular basis with ransomware attacks and quietly paying in bitcoin or other cryptocurrencies, I think would shock most folks in business," the senator said.
Efforts to adopt mandatory reporting requirements for cybercrimes seem to have bipartisan support in Washington. Speaking during a CERAWeek by IHS Markit session in March, Sen. John Cornyn (R-Texas) also spoke of the need for such rules.
Speaking during another CERAWeek session, Sen. Joe Manchin (D-W.Va.) spoke of the need to extend cyberprotections throughout the entire energy system supply chain to prevent hackers from gaining access to critical areas by first infecting those operated by contractors and subcontractors.
The 2.5 million-b/d Colonial Pipeline provides about 45% of the fuel used on the East Coast, carrying refined productions from Texas to the region. The pipeline shut down Friday after the operator said its business systems were hit by a ransomware attack. The company has said it expects to restore a substantial amount of service by week's end and is expected to issue an update on its progress Wednesday.
But the shutdown has prompted panic buying in the Southeast, with OPIS reporting Tuesday that some gas stations in the region were running out of fuel.
--Reporting by Steve Cronin, scronin@opisnet.com
--Editing by Barbara Chuck, bchuck@opisnet.com
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The U.S. Environmental Protection Agency (EPA) said late Tuesday it has issued a second emergency fuel waiver to help alleviate fuel shortages in a total of 12 Southeast and Mid-Atlantic U.S. states and the District of Columbia whose gasoline supply has been interrupted by the Colonial Pipeline shutdown.
EPA said it has waived the federal low-volatility gasoline Reid vapor pressure (RVP) requirements for both conventional gasoline and reformulated gasoline (RFG) for the District of Columbia and areas of Maryland, Pennsylvania and Virginia, and also including Alabama, Delaware, Georgia, specific counties of Florida, Louisiana, Mississippi, North Carolina, South Carolina and Tennessee (designated states).
The gasoline volatility regulations that apply to fuel manufacturers, distributors, resellers, terminal owners and operators, and carriers began on May 1, when EPA typically requires cleaner-burning fuel to limit vehicle tailpipe emissions as air pollution tends to worsen during the warmer months.
"Under this waiver, summer CBOB, summer conventional gasoline (CG), winter CBOB, winter CG, winter RBOB, and winter RFG may be used in RFG-Covered Areas as long as the BOB or gasoline does not have an RVP that exceeds 13.5 psi after the addition of ethanol," EPA Administrator Michael Regan said in a letter to the governors of the designated states.
"Further, under this waiver, fuel manufacturers, distributors, resellers, terminal owners and operators, and carriers may commingle RBOB and CBOB, and RFG and CG, for the duration of this waiver. This waiver is effective immediately and will continue through May 31, 2021," Regan said in the letter.
Similarly, Regan also waived the federal RVP requirements in the designated states through May 31. Under the temporary waiver, regulated parties may produce, sell, and distribute winter gasoline (including BOBs) with an RVP of no more than 13.5 psi after the addition of ethanol in CG areas within the designated areas, he said.
Gasoline that does not meet the regulatory requirements may not be introduced into terminal storage tanks for distribution to retail outlets in the designated states on June 1, EPA said. However, any gasoline meeting the conditions of the waiver that is stored in terminal storage tanks for distribution to retail outlets and wholesale purchaser-consumers may be distributed and sold in the designated areas until the supply is depleted.
Similarly, retailers and wholesale purchaser-consumers in these areas may continue selling or dispensing gasoline that meets the conditions of this waiver after May 31, 2021, until their supplies are depleted, EPA said.
Regulations under the U.S. Clean Air Act require gasoline to meet lower-volatility gasoline RVP requirements in both CG and RFG areas. Regulations also require the use of low-volatility gasoline during the summer months to limit the formation of ozone pollution.
EPA said it and the Department of Energy (DOE) have been actively monitoring the supply of fuel.
"The unusual pipeline shutdown has affected gasoline supplies. The EPA has concluded, with DOE's concurrence, that it is necessary to take action to minimize or prevent disruption of an adequate supply of gasoline to consumers," said Regan in the letter.
OPIS notes that granting fuel waivers is one of the steps the federal government can take to help ease gasoline supply during times of shortage and uncertainty. In its latest update sent Tuesday evening, Colonial Pipeline said that it is continuing to make progress to return the largest U.S. refined-product pipeline to service and that it has taken delivery of an additional 2 million bbl of product from refineries in preparation for a system restart.
--Reporting by Frank Tang, ftang@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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CrossAmerica Partners told analysts Tuesday morning that "certain terminals are having supply outages but nothing widespread," when questioned on the impact of the cyberattack on the Colonial Pipeline, which moves nearly half the gasoline sold on the East Coast.
"From our suppliers right now, we're not getting a whole lot of additional information beyond what is publicly available and that the Colonial expects to resume substantially normal operations by the end of the week," said Charles Nifong, chief executive officer and president, during CrossAmerica's first-quarter earnings call. "If it does resolve by the end of the week, I think that you will see things resuming back to normal and supply being back to normal within a few days after that. If it goes on longer than this weekend, then you'll start to see more disruptions."
Nifong also noted there is a shortage of tanker drivers in the industry, which will "exacerbate further" the supply disruptions. However, "as of right now, (the impact) it's been minimal for us," he said. "We do have a pretty substantial footprint in the market, but so far it's been manageable."
The company reported that first-quarter wholesale fuel volume rose 32% compared to the year-ago quarter, due to acquisitions and exchanges that were completed during 2020 offset by the impact of the COVID-19 pandemic. CrossAmerica said it has been seeing volumes return to normal from the lows early in the pandemic.
"The volume environment is decidedly better than at this time last year. For example, our same-site volume for the last week in March was up approximately 80% year over year. If you look at the quarter, overall, our same-site volume was down approximately 3% relative to 2020, which again was two relatively normal months and then a severe COVID impact in March," said Nifong.
"On a same-site volume basis, the first quarter of 2021 relative to 2019 was down 3.5%. For our year-to-date, same-site volume performance through late April, we are up approximately 5% year over year as we overtake some of the severe volume declines of last year," he said. "Same-site volumes for the recent weeks in April are up 50% or more relative to the same weeks in 2020.
Relative to 2019, our same site volume performance for the year-to-date period was down approximately 3.2%, which shows a continued improving environment, given the improved performance from the quarter-end number."
--Reporting by Donna Harris, dharris@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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Florida Gov. Ron DeSantis on Tuesday declared a state of emergency, marking the latest East Coast state to do so in the wake of the cyberattack on Colonial Pipeline.
In an executive order, DeSantis said "the sudden and unexpected closure of Colonial Pipeline and the attending disruption of fuel supplies poses a severe threat to the State of Florida" warranting emergency action.
The order said the declaration will "suspend the effect of any statute, rule, or order that would in any way prevent, hinder, or delay any mitigation, response, or recovery action necessary to cope with this emergency." The order also allows Florida to seek assistance from the federal government and to coordinate resources with other states in order to deal with the emergency.
The order also specifically allows the state Department of Transportation to waive size and weight restrictions for vehicles transporting gasoline, diesel and jet fuel as well as other refined products into Florida. In addition, the order also allows the state to suspend enforcement of the registration requirements for commercial vehicles providing fuel, waives hours-of-service requirements and suspends enforcement of licensing and registration requirements under the International Fuel Tax Agreement.
Virginia, North Carolina and Georgia have already issued similar emergency declarations. The U.S. Department of Transportation has already waived hours of service requirements for fuel truck drivers in 18 states stretching from the Gulf Coast to New York.
In his declaration, DeSantis noted that the 2.5 million-b/d pipeline "is responsible for transporting a substantial percentage of all fuel consumed on the East Coast of the United States."
The pipeline has been shut since Friday, after operators detected a ransomware cyberattack. The pipeline operator on Monday said that it expected to substantially resume operations by the end of the week, and is expected to make an announcement further detailing plans on Wednesday. Colonial's website was down most of the day Tuesday.
The pipeline transports fuel from Gulf Coast refineries along the East Coast to Linden, New Jersey. The shutdown has primarily impacted fuel supplies in the Southeast, with OPIS reporting stations in those states Tuesday seeing daily sales volumes two or three times the normal pace. This has led to outages at many points and efforts to get transports loaded at terminals that do have fuel.
-- Reporting by Steve Cronin, scronin@opisnet.com
-- Editing by Frank Tang, ftang@opisnet.com
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Colonial Pipeline said Tuesday evening that it is continuing to make progress to return the largest U.S. refined-product pipeline to service and that it has taken delivery of an additional 2 million bbl of product from refineries in preparation for a system restart.
In a Transport4 shipping bulletin sent tonight, Colonial said it has added more lateral, or smaller, spur lines by manually operating them to deliver existing inventories to markets along the pipeline. The company did not specify which lateral lines it has added.
In addition, the Alpharetta, Georgia-based company said it will prioritize delivering to markets that are experiencing supply constraints, or those not serviced by other fuel delivery systems. It is collaborating with the U.S. Department of Energy to evaluate market conditions.
Colonial said that since its pipeline system was taken offline Friday, it has delivered about 967,000 bbl (41 million gal), mainly through its lateral lines, to various delivery points along its system. This includes delivery into Atlanta; Baltimore; Belton and Spartanburg, South Carolina; Charlotte and Greensboro, North Carolina; and Woodbury and Linden, New Jersey, the company said.
"Additionally, in preparation for our system restart, we have taken delivery of an additional 2 million bbl (84 million gal) from refineries for deployment upon restart," the company said.
Earlier Tuesday, U.S. Energy Secretary Jennifer Granholm said the CEO of Colonial Pipeline will be able to make an announcement by the end of Wednesday regarding a full restart of the pipeline.
Granholm said that the areas affected the most by the supply crunch are in the U.S. Southeast, including Georgia, North Carolina, South Carolina, Tennessee and southern Virginia, where most of their fuel supplies come from the Colonial Pipeline without other alternatives.
On Monday, Colonial said its goal was to substantially restore operations by the end of this week.
--Reporting by Frank Tang, ftang@opisnet.com
--Editing by Barbara Chuck, bchuck@opisnet.com
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Virginia has joined the list of states declaring a state of emergency in the wake of the shutdown of Colonial Pipeline.
Gov. Ralph S. Northam on Tuesday issued the emergency declaration. The commonwealth joins the states of Georgia and North Carolina, which had previously declared similar states of emergency.
The U.S. Department of Transportation (DOT) on Tuesday said such declarations allow states to waive weight restrictions for trucks on state roadways. DOT said other states were considering similar declarations. DOT has already waived hours of service requirements for fuel truck drivers in 18 states stretching from the Gulf Coast to New York.
In his declaration, Northam noted that the 2.5 million-b/d pipeline "is the primary source of gasoline to many Virginia retailers."
"While current gasoline reserves in the Commonwealth are sufficient to address immediate supply concerns, a long-term disruption in the pipelines will require transportation of fuel and other oil-derivatives via interstate and state roadways," Northam said.
The Virginia order can last until June 10, unless Northam decides to rescind it earlier. The order calls on state agencies "to waive any state requirement or regulation, and enter into contracts without regard to normal procedures or formalities, and without regard to application or permit fees or royalties."
The pipeline has been shut since Friday, after operators detected a ransomware cyberattack. The pipeline operator Monday said that it expected to substantially resume operations by the end of the week, and is expected to make an announcement Wednesday. Colonial's website has been down all day Tuesday.
The pipeline transports fuel from Gulf Coast refineries along the East Coast to Linden, New Jersey. The shutdown has primarily impacted fuel supplies in the Southeast, with OPIS reporting stations in those states Tuesday seeing daily sales volumes two or three times the normal pace. This has led to outages at many points and efforts to get transports loaded at terminals that do have fuel.
--Reporting by Steve Cronin, scronin@opisnet.com
--Editing by Barbara Chuck, bchuck@opisnet.com
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Georgia Gov. Brian Kemp (R) said on Tuesday he has issued an executive order to temporarily suspend the state's collection of motor fuel taxes through May 15, as a relief to Georgians who are paying higher fuel prices due to Colonial Pipeline's ongoing outage.
In a press conference earlier Tuesday, Kemp said "a run on the gas pump" and "a lot of people buying gas out of abundance of caution" have led to increases in gas prices and some shortages around the state.
"The order will also suspend the collection of state taxes of diesel and motor fuel through Saturday night," Kemp said. According to OPIS MarginPro data, the average retail price of unleaded gasoline in Georgia was $2.930/gal as of 4:37 p.m. ET, almost 20cts/gal higher than a seven-day rolling average of $2.757/gal.
Georgia currently has a state excise tax of 28.7cts/gal for gasoline and 32.2cts/gal for diesel.
Kemp also announced that the Georgia state government is increasing the weight limits for trucks transporting fuel, providing more supply for stations as they receive deliveries, and prohibiting price gouging.
Kemp said that he expects these measures to be temporary as Colonial Pipeline continues to work toward restarting service.
However, as of Tuesday afternoon, neither a press release nor a copy of the executive order has been made available on the Georgia governor's website to provide details of the latest executive order.
It is unclear what Kemp's move to waive state excise taxes would have on fuel supply, because lower prices often increase demand, which could worsen the existing supply crunch.
Despite warnings to stay calm, OPIS reported stations in southeastern states impacted by the Colonial Pipeline shutdown are seeing daily sales volumes two or three times the normal pace on Tuesday, leading to outages at many points and full-fledged scrambles to get transports loaded at terminals that do have fuel.
Earlier Tuesday, U.S. Energy Secretary Jennifer Granholm said that areas affected the most by the supply crunch are in the U.S. Southeast, including Georgia, North Carolina, South Carolina, Tennessee and southern Virginia, where most of their fuel supplies come from the Colonial Pipeline without other alternatives.
Granholm said that the CEO of Colonial Pipeline will be able to make an announcement regarding a full restart by the end of Wednesday.
Due to Georgia suspending its motor fuel tax, OPIS has excluded the tax from its margin calculations from May 12 - May 15.
--Reporting by Frank Tang, ftang@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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The U.S. Department of Transportation (DOT) on Tuesday said it is investigating a "a temporary and targeted waiver" of federal rules that make shipborne transfers of fuel between U.S. port more expensive in an attempt to ease the impact of the Colonial Pipeline shutdown.
In a statement, DOT said it has started the process that could lead to a waiver of the Jones Act, which requires shipments between U.S. ports to be done by ships built, owned and operated by U.S. citizens. Opening such shipments to foreign-built and -flagged vessels could make transporting cargoes of fuel to East Coast ports impacted by the pipeline shutdown cheaper and easier.
DOT said that on Tuesday its Maritime Administration (MARAD) began a survey of Jones Act-qualified vessels to see if there is enough capacity available to carry fuel during the pipeline shutdown or if a waiver is warranted. Responses to the survey were due Tuesday. If it's determined foreign vessels are needed, the Department of Homeland Security could issue the waiver, DOT said.
The move was one of several announced by the DOT as part of its response to the shutdown.
DOT said the Federal Railroad Administration (FRA) is contacting rail operators about their ability to help transport fuel inland once it is delivered to ports.
The agency said it has also added West Virginia to the list of 17 other states where it has waived hours of service rules for fuel truck drivers. States that had previously been granted waivers are Alabama, Arkansas, District of Columbia, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas and Virginia.
DOT said two of the states -- Georgia and North Carolina -- have declared states of emergency due to the shutdown, which include weight waivers for trucks on state roadways. Other states are considering similar declarations, DOT said.
Colonial Pipeline has been shut since Friday, after its operator was struck by a cyber ransom attack. The 2.5-million-b/d pipeline, which runs from Houston, Texas, to Linden, New Jersey, supplies about 45% of the fuel used on the East Coast, the company has said. Colonial has not given any update on operations Tuesday, as its website has been shut down throughout the day.
It's unclear what impact waiving the Jones Act requirement would have in ensuring fuel supply in impacted areas. Colonial on Monday said it expects to have pipeline operations substantially restored by the end of the week.
It takes about seven days to transport fuel from the Gulf Coast to New York Harbor by ship, and little over half that time to southeastern ports. Even if cargoes can be loaded and delivered before supply is back to normal, inland marketers face the problems of finding tanker truck drivers to make the trip to waterborne terminals and back in a market where already-strained truck transport systems are suddenly at a premium and drivers must wait their turn at a reduced number of locations where they can load.
--Reporting by Steve Cronin, scronin@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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U.S. Energy Secretary Jennifer Granholm said Tuesday afternoon that the CEO of Colonial Pipeline will be able to make an announcement regarding a full restart by the end of Wednesday, as most of the largest U.S. refined product pipeline system remained offline following a cyberattack involving ransomware.
"Colonial announced yesterday that they fully expect to substantially restore operations by the end of this week," Granholm said at Tuesday's White House briefing.
"I've had several conversations with the CEO of Colonial, who has indicated by close of business tomorrow, Colonial will be in a position to make the full restart decision," said Granholm.
Granholm added that it would still take a few days to ramp up operations following the possible full restart.
Granholm said that areas affected the most by the supply crunch are in the U.S. Southeast, including North Carolina, South Carolina, Tennessee, Georgia and southern Virginia, where most of their fuel supplies come from the Colonial Pipeline without other alternatives.
"We know that we have gasoline. We just have to get it to the right places. And that's why these next couple of days will be challenging. We want to encourage people that it's not like we have a gasoline shortage -- we have this supply crunch and that things will be back to normal soon," Granholm said.
"We are asking people not to hoard and we're all over this," she said.
Granholm said that Department of Energy officials (DOE) have been having multiple daily calls with Colonial Pipeline's senior executives since the weekend, allowing DOE to share information with the federal government and stay in sync with progress made by the pipeline company.
Despite warnings to stay calm, OPIS reported stations in southeastern states impacted by the Colonial Pipeline shutdown are seeing daily sales volumes two or three times the normal pace on Tuesday, leading to outages at many points and full-fledged scrambles to get transports loaded at terminals that do have fuel.
Colonial Pipeline said late Monday its main gasoline and diesel lines connecting Houston and Linden, New Jersey, remained offline, as it has restarted Line 4, which runs from Greensboro, North Carolina, to Woodbine, Maryland, as well as some smaller lateral lines connecting terminals.
--Reporting by Frank Tang, ftang@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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Refineries in the U.S. Gulf Coast on Tuesday were reported to have fixed tankers for short-term storage deals for clean products as the markets grapple with the Colonial Pipeline outage.
OPIS on Monday reported that the pipeline closure was beginning to impact U.S. Gulf Coast refinery operations and possibly forcing reduced operations rates.
Refiners such as Marathon, Phillips 66, PBF and Valero were reported to have put tankers on subjects this week for time charters that range between 15 days out to 40 days, according to ship brokers. The deals were done for rates between $20,000/day to $30,000/day and range in size of a medium-range tanker to a Suezmax tanker.
Freight rates for cargoes originating in the U.S. Gulf have also seen values almost double since the end of last week in the wake of the pipeline shutdown as market players scramble for tonnage to load product.
For instance, cargoes for the USG/Caribs route were reported by shipbrokers at values for lump sum $900,000 on Tuesday compared with LS $650,000 on Monday and LS $485,000 on Friday May 7.
Meanwhile, cargoes of gasoline were making their way to the U.S. Atlantic Coast.
IHS Markit's Market Intelligence Network ship tracking data show roughly 2.4 million bbl of gasoline cargoes expected to land in the New York Harbor this week. Also, MINT showed 12 vessels anchored outside of New York Harbor, laden and ballast, with various clean and dirty cargoes. The number of ships waiting were double the number of anchored vessels at this time last week.
--Reporting by Eric Wieser, eric.wieser@ihsmarkit.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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Despite warnings to stay calm, stations in southeastern states impacted by the Colonial Pipeline shutdown are now seeing daily sales volumes two or three times the normal pace, leading to outages at many points and full-fledged scrambles to get transports loaded at terminals that do have fuel.
Emergency conference calls have been underway with marketer associations from Alabama, Georgia, Florida, the Carolinas, Virginia, Maryland and Tennessee. Among the items on the agenda are help via RVP waivers, relief on weight restrictions for trucks, and what to do to keep customers happy but not hoarding.
Georgia appears to be a real hot spot. Marketers in the Greater Atlanta area and at other sites on Colonial Pipeline are working overtime to keep stations wet, but there are reports of numerous stations that do not have fuel. Waterborne terminals including Savannah and Jacksonville, Florida, have availability, but in some cases those facilities are being tapped for tanker truck hauls of hundreds of miles. Tallahassee, for example, is getting some of its product from Jacksonville.
Marketers are struggling with how to address a consumer panic that can lead to a self-fulfilling prophecy of little fuel availability. Some have tried limiting customers to 10 gallons or $30 worth of fuel but find that such action incurs customer wrath as well as confusion between the pumps and inside the store.
States are also looking for help on RVP. Nearly all terminals were to have converted to summer-grade gasoline by May 1, but there are now concerns that fuel-starved stations will not have the ability to turn tanks over and adhere to the tougher summer standard on June 1.
Long distances are being traveled to keep stations wet and the driver shortage that OPIS warned about in an April story is rearing its head. That means that companies with their own transport fleets are heavily advantaged versus those who might often play various carriers against one another in negotiations. Companies like Pilot and RaceTrac are in much better shape on fuel than firms like Murphy USA because of fleet ownership.
OPIS will continue to update this supply scramble as the day progresses, but it is clear that a substantial slice of southeastern geography is seeing the panic behavior normally associated with hurricanes.
--Reporting by Tom Kloza, tkloza@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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Some market highlights from the fifth day of downtime for the Colonial Pipeline system:
Panic buying at the bulk trader level was witnessed Sunday evening but was not a feature during the Monday session. Spot gasoline prices begin May 11 at very similar levels to where they closed on Friday, May 7. Tuesday morning crude prices have descended by about 80cts/bbl, with 1.25-1.5ct/gal drops in RBOB and diesel.
Traders and marketers are faced with parsing the language of Colonial Pipeline's latest updates, which point to a "significant" restoration of operations by the weekend. That certainly indicates that fuel will be pumping into mainline and spur terminals, but it's not clear at what percentage of overall capacity. Somewhere between 10 million and 12 million bbl of refined products has been suspended in the system since a ransomware attack led to suspended operations on Friday.
A small flurry of import cargoes was fixed for transatlantic shipment Monday morning, and that helped drive Renewable Identification Number (RIN) prices drastically higher. Ethanol RINs at one point topped $1.80 while biodiesel RINs flirted with $1.88. Prices for these D6 and D4 RINs begin Tuesday at $1.79 and $1.865, respectively, putting hypothetical merchant refiner and importer Renewable Fuel Standard compliance costs above 20cts/gal.
Still, it's not clear whether imports will eventually top the more than 1 million b/d of arrivals that have characterized the last three weeks of U.S. Energy Information Administration data. Much of the product is likely to head to deepwater ports in the Southeast.
Among refiners, Motiva was one of the more aggressive suppliers, cutting back on crude runs by about 45% and tightly allocating downstream unbranded fuel supply. Other smaller cutbacks tied to the lack of an immediate outlet for gasoline, diesel and jet fuel were reported in Houston, Beaumont and Port Arthur, Texas.
Retail gas prices surged over the weekend and begin Tuesday with an average of $2.9854/gal, up $1.1379/gal from last year. Year-on-year increments vary from a low of 68.19cts/gal in Hawaii to as much as $1.3792/gal in Idaho. Most of the states impacted by the Colonial shutdown see price increases of about $1.10/gal from last year.
Colonial Pipeline's Line 4, which runs from Greensboro, North Carolina, to Woodbine, Maryland, is operating at manual control. Other spurs or laterals are to be restarted before mainline operations, sources say.
While premium maintains a very small percentage of motor fuel market share (around 10%), it is often the first grade where availability is compromised. Outages have been reported in Virginia, North Carolina and Maryland. Outages of unleaded gasoline are popping up like spring thunderstorms in the Carolinas, Tennessee, Georgia and Alabama, but most stations and terminals are "wet" with available physical supply.
Early indications from the OPIS Volume survey for the week ending May 8 show a small increase of about 0.3% from the previous week but portray a country that is still using 15% or so less motor gasoline than at a similar time in 2019.
--OPIS staff report
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Colonial Pipeline on Monday evening said it has restarted Line 4, which runs from Greensboro North Carolina to Woodbine, Maryland.
The pipeline is currently operating under manual control for a limited period of time while there is existing inventory available, Colonial said in its latest update. The main lines remain down, but Colonial has been able to start
some of the smaller lateral lines between terminals and delivery points.
The Georgia-based company said it continued to evaluate product inventory in storage tanks at its facilities and others along its system, and it is working with shippers to move those products to terminals for local delivery.
In its latest Trasnport4 bulletin sent Monday evening, Colonial Pipeline said its shipper nomination, scheduling, and inventory systems are down, and nomination changes and additions cannot be accepted at this time. The company
said it will advise shippers when nominations can be updated and new schedules produced.
As Colonial resumes operations on delivery in its stub lines and main lines, the system will be operated based on the scheduled currently in Transport4, it said.
Colonial said it continues to work with third-party cybersecurity exports, law enforcement and other federal agencies as the pipeline operator plans on a phased restart. Earlier today Colonial said that it has a goal of restoring operations by the end of the week.
OPIS earlier today reported multiple suppliers that are out of product as well as strong rack price moves at many southeast locations. Sources this evening note some premium gasoline outages popping up, adding that Norfolk, Virginia, and Baltimore, Maryland, should see some barges landing.
Several refineries also reduced operations with the pipeline down as OPIS reported that runs were reduced at the 440,000 b/d CITGO Lake Charles refinery. In Port Arthur, Texas, Motiva reduced crude runs at its 639,700 b/d refinery there while Total cut rates at its 245,000 b/d facility.
NYMEX futures this evening are pointing lower, with light trading volumes during the evening hours. Refined product losses are running either side of a penny at 9:30 PM ET. June RBOB last traded at $2.1217/gal, down 1.17cts. Front month ULSD last printed down 0.71cts, at $2.0095/gal. Crude oil prices are down as well, with June WTI trading at $64.57/bbl and Brent at $67.92/bbl, for a loss of 40cts.
--Reporting by Denton Cinquegrana, dcinquegrana@opisnet.com
--Editing by Frank Tang, ftang@opisnet.com
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Wholesale gasoline and diesel prices for U.S. Southeast markets supplied by the Colonial Pipeline jumped Monday, and a fourth day of an outage on the largest U.S. refined product pipeline has caused some terminals to run out of fuels and prompted others to tighten supplies.
According to OPIS data as of 2 p.m. ET, the number of rack-price moves was above average and at the highest level since at least early February, with2,797 gasoline price moves averaging 2.14cts/gal, and 1,883 diesel price moves averaging 2.45cts/gals. Earlier Monday, average gasoline rack price gains were almost 6cts/gal, and those of diesel were more than 4cts/gal.
An OPIS data analysis showed that states that are served along the 5,500-mile route of Colonial Pipeline held onto outsize gains from earlier Monday, even though most other markets have either pared gains or turned to losses following a similar reversal in NYMEX RBOB and ultra-low-sulfur diesel futures.
They include: Alabama (plus 7.32cts/gal), Mississippi (plus 6.69cts/gal), Tennessee (plus 6.83cts/gal), Georgia (plus 7.67cts/gal), South Carolina (plus 7.61cts/gal), North Carolina (plus 6.91cts/gal), Virginia (plus 5.62cts/gal)
and Maryland (plus 6.32cts/gal). Colonial Pipeline carries refined products from the U.S. Gulf Coast to the East Coast, where it terminates in Linden, New Jersey.
Gains at those rack markets were remarkable considering both RBOB and ULSD futures settled at less than a penny higher Monday, after they spiked about 6-8cts/gal earlier in the session.
Some product terminals have already reported outages of some gasoline, or are expecting to see outages within the next 24 hours. Some of the biggest fuel distributors including Marathon Petroleum Corp. and Citgo are also tightening supplies by modifying their allocation volumes.
For example, OPIS data shows Murphy Oil USA Inc's Magellan Terminal at Albany, Georgia, supplies only branded gasoline and ultra-low-sulfur diesel products.
In times of fuel shortages, unbranded fuel prices often become higher than branded ones, known as a price inversion, as terminals almost always reduce allocations to unbranded suppliers first.
Mansfield Energy, one of the largest fuel suppliers with 8,000 customers in the U.S. and Canada, said Monday afternoon that it has required that customers in Alabama, Tennessee, Georgia, Florida, South Carolina, North Carolina, Virginia and Maryland provide 72-hour notice for new deliveries. In addition, Mansfield now requires Louisiana, Mississippi, Arkansas and Kentucky customers to provide 48-hour new-delivery notice.
"Because carrier capacity was strained before the outage, fuel trucks may need to be pulled from surrounding markets to serve impacted areas," Mansfield said.
The U.S. government Sunday declared a regional emergency waiving Hours of Service and other fuel transportations requirements for 17 states and the District of Columbia affected by Colonial Pipeline's outage.
Jobbers told OPIS that BP has reported physical outage of some midgrade and regular gasoline at its Spartanburg, South Carolina, terminal as well as some locations in Georgia. Also, jobbers said Monday that Florida distributors have enough inventories "for a few days," but they expect supply issues to arise if the outage continues past midweek.
According to a shipper bulletin sent by Citgo on Sunday, the company said its Fairfax, Virginia, terminal was out of reformulated gasoline (RFG) premium grade with resupply to be determined, and its Richmond, Virginia, terminal was out of CBOB unleaded regular. Citgo also told shippers Sunday that it was expecting certain CBOB outages within the next 24 hours in some of its North Carolina, South Carolina and Tennessee terminals.
A Shell jobber told OPIS on Monday that a Shell product terminal in Nashville, Tennessee, remained out after it ran out of all gasoline Sunday.
A Pilot bulletin Sunday is advising customers that E10 regular gasoline will be unavailable at the TPSI/Richmond Terminal in Virginia until further notice.
A shipper bulletin sent by Marathon Petroleum on Friday said that customers were expected to see unbranded fuel shut off and branded contracts allocating along most of the Colonial Pipeline-supplied terminals including Richmond and Chesapeake in Virginia and Selma and Charlotte in North Carolina.
Ernie Barsamian, CEO at Tank Tiger, a brokerage for terminal storage, said Colonial Pipeline delivery locations such as Atlanta, and Charlotte and Greensboro in North Carolina, are most vulnerable because they are landlocked and their terminals do not have as much storage capacity as waterborne markets.
"We'll likely see product trucked from locations such as Savannah, Georgia; Wilmington, North Carolina; and Charleston, South Carolina, to these landlocked markets in the event that the shutdown is prolonged," Barsamian said.
Barsamian said that whether additional storage space is needed depends on the duration of the outage, as U.S. Gulf Coast refineries were reluctant to reduce their crude run rates in previous instances when Colonial Pipeline's main lines were down.
According to OPIS MarginPro data as of 6:50 p.m. Eastern time Monday, average gasoline margins in Georgia and South Carolina were up around 3.5cts/gal and 1.1cts/gal, respectively. However, most other states served by the Colonial Pipeline, which historically have the lowest gasoline margins in the U.S., saw their margins decrease Monday, suggesting that retailers have not yet passed along or are unable to pass along rack price increases to consumers by raising prices at the gas pump.
The average U.S. gasoline margins were down 1.4ct/gal, at 23.4cts/gal, and average national diesel margins were down by 1.7ct/gal, at 29.1cts/gal, according to OPIS MarginPro.
--Reporting by Frank Tang, ftang@opisnet.com; Donna Harris, dharris@opisnet.com
--Editing by Barbara Chuck, bchuck@opisnet.com
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Renewable Identification Number (RIN) credits shot to fresh all-time highs Monday morning in response to increased imports due to the shutdown related to a weekend cyberattack on Colonial Pipeline in the U.S.
Market sources early in the session told OPIS that an anticipated surge in fuel imports pushed buying interest higher.
"Importers buy in large chunks and don't mess around," one trader said. "This is just a spike and it probably won't last, but it's fuel to the fire."
Colonial, the largest refined-product pipeline in the country, has had its main lines shut down since Friday, when RINs credits registered yet another day-on-day increase that saw most categories up 15%-20% week to week. The
pipeline carries refined products from the U.S. Gulf Coast to the East Coast.
Ethanol-related D6 2021 RINs were reported traded from $1.78 to $1.82 by midmorning. Prices were reported easing to $1.79 before a midday lull. The credits Friday were assessed at $1.7375, up 5.5cts to the highest level in the 13-year history of OPIS RINs assessments. The assessment added 24.25cts last week and has risen in 16 of the last 17 sessions.
Biomass-based diesel D4 2021 RINs were reported traded from $1.85 to $1.89 by midday. The credits were also reported traded at a 7ct premium to 2021 D6s credits early in the session. OPIS on Friday assessed the credits at $1.8250, up 5.5cts on the day and 24.75cts on the week.
Friday's current-year D4 assessment marked the highest level since Sept. 20, 2011, when it was $1.825. The all-time high OPIS RINs assessment of $1.99 was hit that month.
The OPIS Renewable Volume Obligation (RVO) assessment -- the implied cost of RFS compliance for refiners and importers of gasoline or diesel who do not blend biofuels -- is positioned to finish Monday at a new all-time high. The
RVO value Friday moved up to 20.807cts/gal, the highest level in the 13-year history of OPIS RINs assessments.
The RVO value entered 2021 around 10.1cts/gal and held an all-time high of 14.2cts/gal from July 2013. The assessment is up 322% from the same time a year ago.
--Reporting by Aaron Alford, aalford@opisnet.com
--Editing by Jordan Godwin, jgodwin@opisnet.com
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The operator of Colonial Pipeline on Monday said it hopes to "substantially" restore service along the country's largest refined product pipeline by the end of the week.
In a statement, Colonial Pipeline said it was dedicating "vast resources" to restoring service and that it was bringing segments of the pipeline back online in a phased approach in keeping with U.S. regulations.
"Restoring our network to normal operations is a process that requires the diligent remediation of our systems, and this takes time," the company said.
Colonial said it was evaluating inventory in storage at its facilities and along its system and was working with shippers to move that product to terminals for local delivery. The federal government's move to temporarily waive hours of service regulations for drivers transporting refined products along the pipeline's route "should help alleviate local supply disruptions," the company said.
The pipeline has been shut since Friday after operators identified a cyberattack. The U.S. Federal Bureau of Investigation on Monday said it has identified ransomware from a group of hackers known as DarkSide as being responsible for the attack.
In a statement Monday, the FBI said it was working "with the company and our government partners on the investigation" of the attack, which has shut the largest U.S. refined product pipeline for four days.
When writing about the DarkSide group, the cybersecurity and anti-virus provider Kaspersky Lab has described a sophisticated group of hackers that has its own website and issues press releases about its activities. In addition to
locking computer systems, the group frequently threatens to also leak company data as a way to further pressure its victims to pay, according to Kaspersky. The group also says it will never attack medical companies, funeral parlors, educational institutions, or nonprofit or government organizations and posts about donations it makes to charities, the cybersecurity firm has written.
--Reporting by Steve Cronin, scronin@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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Europe-based charterers are booking oil product tankers and freight rates for shipping fuel across the Atlantic jumped Monday following the Colonial Pipeline shutdown on May 7, although import demand may be limited following a muted price response in the U.S. oil markets.
At least three Medium Range tankers were booked Monday to haul 37,000 metric tons of gasoline across the Atlantic from the northwest European hub of Amsterdam-Rotterdam-Antwerp, according to a shipbroker report. Freight for
tankers hauling 37,000 mt refined product cargoes to New York from Rotterdam, typically gasoline, was pegged at 160.56 WS Monday, up from 127.5 WS points Friday, according to data from the Baltic Exchange.
While gasoline futures trading in the U.S. was reportedly active, June RBOB was up by less than 2cts/gal to $2.1445/gal by 10 a.m. ET Monday. In Group 3 (U.S. Midwest), prompt delivery sub-octane gasoline (V-grade) was last talked around 8.50cts/gal below June NYMEX RBOB futures, widening the discount by 0.75cts/gal compared to last week's ending mean differential. Implied prices were pushed into the red by 1.11cts/gal, at $2.0383/gal around 10:30 a.m. ET Monday.
"Medium Range (MR) [tanker freight is] firming on speculation and owners are asking more for their ships," said one European shipbroker. "But it will depend on how long it takes to restart the pipeline. If it goes past [Tuesday] then we
should have a short-term spike [in freight], if not, then may be no change."
One of the MR tankers, the Largo Evolution, was on subjects to CSSA at a rate of 135 Worldscale (WS) points, according to the report. Two Long/Large Range oil tankers, each capable of hauling between 60,000 and 90,000 metric tons of refined products such as gasoline and diesel, were also said to be provisionally booked for the same voyage.
After learning it was the victim of a cybersecurity attack, the Colonial Pipeline Company took some systems offline to contain the threat, and in doing so temporarily halted all pipeline operations, it said in an updated press statement May 9. Its main lines 1, 2, 3 and 4 remain offline, although some smaller lateral lines between terminals and delivery points are operational and restoring service to other parts of the network is underway.
The Colonial Pipeline Company has yet to confirm when its main lines would restart. Norwegian investment bank DNB Markets noted Monday there was no physical damage to the pipeline, and at the time of the outage it was running below capacity. Additionally, Kinder Morgan is working to accommodate additional barrels on its PPL (Products (SE) Pipeline) line, formerly the Plantation Pipeline, according to the bank's senior oil analyst Helge André
Martinsen in a daily report Monday.
Still, Forward Freight Agreements (FFAs), financial instruments for valuing future levels of freight rates, were rising in Europe Monday morning local time, according to sources. Balance month May FFA for TC2_37 closed at 130.5 WS
points Friday, according to data from the Baltic Exchange, but was said to be between 25 and 30 points higher Monday morning U.K. time, according to another shipbroker.
The Colonial Pipeline network is the largest refined products pipeline in the United States, shipping more than 2.5 million b/d, according to company data. It transports some 45% of all fuel consumed on the U.S. East Coast, providing refined products to more than 50 million Americans. Should consumers rush to fill up their gasoline tanks to hoard fuel for fear of a shortage, it could tighten supplies, according to the DNB Markets report.
"Traders seem relaxed so far, but think we'll know more on the U.S. open," said a third European shipping source. "Like all these things, it's an exponential duration game: right now small, but Friday it could be [going] bananas."
--Reporting by Rob Sheridan, rob.sheridan@ihsmarkit.com; Jen Caddick, jenny.caddick@ihsmarkit.com; Andrew Atwal, aatwal@opisnet.com
--Editing by Yazdi Merchant, yazdi.merchant@ihsmarkit.com
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Spot prices for U.S. Gulf Coast gasoline and distillates shed more than a penny in the morning trading hours on Monday as focused remained on the Colonial Pipeline after a cyberattack led to shutdowns.
Colonial, the largest refined product pipeline in the country, has had its main lines shut down since Friday. Colonial Pipeline carries gasoline and distillates products from the Gulf Coast through the southeast and into the New
York area with a capacity of more than 2 million b/d.
The company said on Sunday that it was in the process of restoring service on laterals and would resume operations on the full system when deemed safe and in compliance with federal regulations.
Gasoline trading values have not seen dramatic change as market participants monitor developments with the Colonial Pipeline. With Cycle 29 not reaching a scheduling deadline until Thursday, traders have time to gauge the situation.
Prompt CBOB (9-lb. RVP "A2") was heard traded at 14.75cts/gal under June NYMEX RBOB futures after deals were heard and confirmed at 15cts/gal below the screen. The latest indication tugged differentials 0.38cts lower than the prior session's mean. The weaker trading levels and fall in futures pushed implied prices down 1.68cts, to $1.9664/gal as of about 10:55 a.m. ET.
RBOB (7.4-lb. RVP "F1") discounts held at 5.25cts/gal under June futures with limited discussion in the early hours. The softer futures pulled implied prices 1.30cts lower to $2.0614/gal.
Conventional gasoline (9-lb. RVP "M2") basis levels ticked up 0.13cts, to 8.25cts/gal under the June contract. The uptick offered limited cushion from the lower futures as implied prices declined 1.18cts, to $2.0314/gal.
Capacity on Colonial Pipeline Line 1, the main gasoline line, strengthened by a quarter of a cent to run even with tariff rates amid firmer bid levels.
Distillate fuels were all weakening after the first few hours of the trading day in the U.S. Gulf Coast, with only minor weakness seen for trading values and cash values largely following futures.
Distillate fuels will not see nearly the same impact from the Colonial Pipeline shutdown, with export opportunities easier to come by than for gasoline. That being said, differentials could still face downward pressure if the major pipeline out of the region is stymied beyond the next day or so, sources have said.
As of Monday morning, action remained quiet with only ultra-low-sulfur diesel seeing any pressure lower, despite a scheduling day for jet fuel on Cycle 29 that was not spurring much additional trading action. Prices looked to futures
and shaved off some strength to start the day.
Prompt ULSD was heard trading early at 5.25cts beneath the June ULSD futures contract but did get talked a little higher with chatter centered around 5.15cts below futures -- off just 0.20cts from Friday's mean. Prices shifted
down a little more than a penny to $1.9505/gal but remained over the $1.95/gal mark for another session.
Ultra-low-sulfur heating oil did see a little more pressure but the gap to ULSD spot values has been widening over the last several sessions. ULSHO was last pegged at 21.35cts below ULSD spot prices, or a 26.50ct discount to the June
Merc. Prices shifted down about 1.75cts to $1.7370/gal.
High-sulfur diesel for Cycle 29 had yet to move from the 33ct discount to June futures seen over the last few days, leaving cash prices to drop 0.75cts, to $1.6735/gal.
Jet fuel for Cycle 29, which schedules today, was quiet and valued around 26.50cts below the June Merc -- up 0.15cts from where the market was on Friday. That did little to stave off futures losses, and prices shuffled down 0.75cts, to $1.7268/gal.
Colonial Pipeline line space for Line 2, the main distillate line, remained at a 0.30ct discount to tariffs so far this morning.
--Reporting by Justin Schneewind, jschneewind@opisnet.com; Cory Wilchek, cwilchek@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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The U.S. government declared a regional emergency waiving Hours of Service and other transportation regulations for 17 states and the District of Columbia affected by the cyberattack of the Colonial Pipeline.
The May 9 declaration says the waiver will be in effect until the emergency ends or through June 8, whichever is earlier.
Regional field administrators for the Federal Motor Carrier Safety Administration's (FMCSA) Eastern, Southern and Western Service Centers have exempted motor carriers from Parts 390 through 399 of Title 49 of the Code of
Federal Regulations in response to the "unanticipated shutdown of the Colonial pipeline system due to network issues that affect the supply of gasoline, diesel, jet fuel and other refined petroleum products throughout the affected states."
The areas covered by the declaration are Alabama, Arkansas, District of Columbia, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas and Virginia.
The declaration says the waiver applies to motor carriers and drivers providing "direct assistance to the emergency in the affected states in direct support of relief efforts related to the shortages of gasoline, diesel, jet fuel and other
refined petroleum products due to the shutdown, partial shutdown, and/or manual operation" of the Colonial Pipeline system.
Drivers that contributed to relief efforts can return empty to their terminal or work location. When moving from emergency relief to normal operations, a 10-hour break is required after working 14 hours, the declaration says.
Motor carriers or drivers subject to an out-of-service order are not covered by the waiver, the FMCSA says.
--Reporting by Donna Harris, dharris@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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So far RFG is up more than 6.3 CPG nationally in a mid-day move, but MS, NC, TN, SC, GA and AL are all moving up more than 7cpg on average in mid-day moves.
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Colonial Pipeline Co. said Sunday evening its mainlines including Line 1 gasoline and Line 2 distillates lines remained offline, as the largest U.S. refined product pipeline serving markets throughout the Southern and Eastern U.S. is developing a system restart plan following a cyberattack involving ransomware.
The company said that its mainlines, including Lines 1, 2, 3 and 4, remained offline, while some smaller lateral lines between terminals and delivery points are no operational.
"We are in the process of restoring service to other laterals and will bring our full system back online only when we believe it is safe to do so, and in full compliance with the approval of all federal regulations," Alpharetta, Georgia-based Colonial said in a statement.
In a shipper bulletin Sunday evening, Colonial said that it has no evidence that the ransomware affected Colonial Pipeline's email systems and the system that delivers its shipper bulletins via the Transport4 Bulletins. As a result,
the company said it will continue to send shipper communications via Transport4 and use emails to conduct business moving forward.
Colonial said that its personnel have taken additional precautionary measures to help further monitor and protect the safety and security of its pipeline. However, the company did not provide clarifications about those measures.
Early Saturday, the company confirmed it has temporarily halted all pipeline operations, including IT system as well as nominations and scheduling, following a cyberattack that involved ransomware. On Friday, Colonial Pipeline said it encountered "network issues" that impacted pipeline operations.
"We have remained in contact with law enforcement and other federal agencies, including the Department of Energy (DOE) who is leading the Federal Government response," the company said.
The DOE did not return a request for comment.
On Sunday, the U.S. Department of Transportation (DOT) said it has issued a temporary hours of service exemption that applies to tanker trucks transporting gasoline, diesel, jet fuel and other refined petroleum products, in a bid to
avoid disruption to supply as part of the federal government's efforts to assess the implications of the incident.
The exemption, which is common after a storm and other natural disasters, applies to tanker trucks in Alabama, Arkansas, District of Columbia, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas and Virginia, the DOT said.
Patricia Hemsworth, senior vice president of New York-based introducing broker Paragon Global Markets, said there are now more incentives for fuel distributors to arrange waterborne cargoes from Europe. Hemsworth said the Northeast can also receive products from the Midwest because of the reversal of the Buckeye Pipeline's Laurel Pipeline.
OPIS notes that the greatest concern is in coastal states from Georgia north to the Delmarva Peninsula, and Tennessee is also a primary supply concern, as it contends with run outs of gasoline during normal circumstances. Meanwhile, Northeastern supply can readily be supplemented by gasoline imports, as gasoline and various components have averaged over 1 million b/d for three consecutive weeks.
The 272,100 Phillips 66 Bayway refinery has also been grappling with production issues as a mid-week issue with the FCC unit, potentially leading on the heavier reliance on imports.
Damian Courvalin, energy analyst at Goldman Sachs, said Sunday he expects any disruptions will likely be brief, citing no physical damage and sufficient inventories.
Courvalin also said resupply should be rapid due to many factors including: the Colonial pipeline was running below capacity so a resumption of flows at capacity would accelerate the restocking; Kinder Morgan is working to accommodate additional barrels on its Plantation Pipeline; Vessels from the US Gulf Coast and Europe can arrive in 7 to 14 days; and the U.S. administration could waive the Jones Act shipping restriction as well as summer gasoline requirements.
--Reporting by Frank Tang, ftang@opisnet.com
--Editing by Denton Cinquegrana, dcinquegrana@opisnet.com
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It's the second day of a system disruption on the country's largest product pipeline, and Colonial Pipeline executives have now acknowledged that they were the victims of a cyberattack.
The attack has temporarily halted all pipeline operations and impacted IT systems, including nominations and scheduling.
There is no word on when movement on the line that extends from Pasadena, Texas, north to Linden, N.J., and New York Harbor will be restored. However, traders speculate that if the line is not back up and running by Sunday evening when electronic CME action for RBOB and ULSD commence, there could be some volatile increases in futures, coupled with "mark-downs" for Gulf Coast sourced products.
The greatest concern is in coastal states from Georgia north to the Delmarva Peninsula. Northeastern supply can readily be supplemented by foreign imports of gasoline, and indeed gasoline and various components have averaged over 1 million b/d for three consecutive weeks. Tennessee is also a primary supply concern, as it often runs out of gasoline during normal circumstances.
Some marketers say they will add to inventory because of the uncertainty, fearing that "runs on terminals" are possible in southeastern points. Theoretically, the Plantation Pipeline can accommodate another 100,000 b/d or
so of product that it moves from Louisiana to northern Virginia.
One clear worry has to do with news flow. A cyber attack on the country's most vital pipeline will be a headline story through Monday. It could promote a spike in consumer purchases of gasoline in the areas served by the line.
The number of days that the line is out of service is critical. "Two days can be made up in orderly fashion," noted oil consultant Andy Lipow. "Five days" would be a much more significant blow to logistics.
One analyst compared the downtime number to the Richter Scale for seismology. A "2 or 3" on the scale is not a big deal, but "5 to 9" can be devastating.
Diesel is not expected to see much crisis buying, since May is one of the lowest months for diesel consumption. Gasoline is the clear concern, especially with the peak driving season approaching. Previous OPIS analysis has suggested that some summer days could see 9.5 million b/d or so of consumption, straining the ability of transport truck drivers to move product from terminals to stations. Under ideal circumstances, Colonial takes about 15 days to pump fuel from the Pasadena, Texas, origin to the Linden, N.J., terminus. With lower amounts of fuel in the line, the trip can average around 18 days.
For now, gasoline demand has not taken flight. Most recent OPIS Volume surveys (of more than 40,000 fuel sites) show recent motor fuel offtake running about 14% below same week in 2019.
A glance at US gasoline inventories shows a comfortable nationwide supply of 235.8 million barrels, or 9.7 million barrels more than the "last normal year" of 2019. Middle Atlantic inventories are more than adequate at 36.5 million
bbl, or 5 million bbl more than the start of May 2019. New England also has more gasoline than two years ago.
The problem is Lower Atlantic states where gasoline inventory stands at 23.8 million bbl, compared to 25.1 million bbl in early May 2019. From Alabama north through Baltimore appears to be the region most compromised by the shutdown. Midwestern and Ohio Valley geography, meanwhile, may get more fuel thanks to the ability of Gulf Coast refiners to pump locked-in barrels to those interior destinations on the Explorer or Magellan pipelines.
Despite continued demand destruction, jet fuel could be a big problem. Many major airports along the East Coast operate on only 3-5 days' worth of inventory. Hence a two to five day suspension of a pipeline that in some cases
moves jet fuel direct to major airports (Hartsfield in Atlanta e.g.) can have a dramatic impact.
Surprisingly, markets on Friday didn't behave drastically on the news of the Colonial shutdown. June NYMEX RBOB settled at $2.1269/gal (up 1.32cts/gal) while ULSD rallied 2.11cts/gal to $2.0106/gal. Gulf Coast discounts widened
thanks to the logistic difficulty of moving product with CBOB trading at a 14.5cts gal discount to NYMEX RBOB and ULSD at 5cts/gal under futures.
Should the line remain down for several more days, the secondary market for line space could get more interesting. If there is a dynamic "catch-up period" to move barrels to tight East Coast markets, line space for some later May cycles might catch some firm bids.
One other possibility deserves mention. With hurricanes or even superstorms, U.S. regulators have occasionally suspended the Jones Act so that suppliers can move barrels between deepwater ports at cheap foreign flagged tanker rates. One could make the case that the Biden Administration might consider such a move sooner rather than later if Colonial software issues persist.
The vulnerability of U.S. energy infrastructure to cyberattack has long worried security experts and national leaders.
In 2019, the U.S. General Accounting Office issued a warning about oil and gas pipelines' vulnerability to cyber and physical attack. In the warning, the GAO said that pipeline operations are vulnerable to hacking attacks because they
rely on sophisticated computer systems for operations.
The energy sector, which includes pipelines, experienced more cyber incidents than any sector from 2013 to 2015, accounting for 35% of the 796 incidents reported by all critical infrastructure sectors, according to the report.
In October 2018, the U.S. Department of Homeland Security (DHS) created the Pipeline Cybersecurity Initiative (PCI) to address cybersecurity risks to the country's pipeline infrastructure.
Speaking during CERAWeek sessions in March, both Texas Sen. John Cornyn, a Republican, and West Virginia Sen. Joe Manchin, a Democrat, said they expected congress would take up legislation requiring companies to report cyberattacks. There is currently no reporting requirement, and officials only learn of incidents if companies voluntarily disclose information about hacking, Cornyn had said. Manchin, chair of the Senate Energy and Natural Resources Committee and chair of the Cyber Committee on the Senate Armed Services Committee, warned that cyberthreats to the energy sector were escalating and said it was important to harden the entire energy supply chain - including requirements for contractors and subcontractors - to protect energy infrastructure.
Manchin also called for the United States to strongly retaliate against state perpetrators of cyberattacks, with attacks in kind. He warned of cyber threats from both Russia and China, warning that Russia, in particular, is "very prolific" when it comes to cyber activities.
-- Reporting by Tom Kloza, tkloza@opisnet.com
--Editing by Steve Cronin, scronin@opisnet.com
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Colonial Pipeline encountered "network issues" that impacted pipeline operations on Friday, the company said in an early-afternoon shipping bulletin.
"The Colonial technology team is aware and working to restore service as quickly as possible," the company said in a statement.
Colonial Pipeline, the largest refined products pipeline in the country, carries gasoline and distillates from the Houston area to the New York area, bringing more than 2 million b/d.
The discussions around the suspected technological issues affecting the Colonial Pipeline attracted attention in the market, but the issue might not have much of an impact even if there is a shutdown of a day or two, a trading source said.
Last August, Colonial Pipeline was forced to shut Line 1, which carries gasoline material. The stoppage stemmed from a leak in North Carolina, with the line only down a handful of days.
Typically, a line closure on Colonial Pipeline will bring opposite effects at the ends of the pipeline. Gulf Coast products will see selling as the barrels back up into the market with material not being able to load into Colonial, while northeastern markets will see prices jump as fewer and fewer barrels are able to travel up the Eastern Seaboard.
When Colonial Pipeline shut down in August, gasoline basis levels briefly dipped a few pennies and New York harbor regional differentials strengthened, but those movements only lasted about a week before returning to normal.
Heading into the afternoon hours of today's session, gasoline and distillate prices were strengthening in the Gulf Coast and New York region.
Gulf Coast gasoline saw prices tack on about 1.50cts from futures strength, with only minimal movement from differentials. Distillate products followed suit, adding on about 1.75-1.90cts in the early afternoon. CBOB moved to $1.9865/gal, while RBOB topped $2.04/gal at around 1:00 pm. Eastern Time. ULSD also breached the $1.95/gal mark with today's gains, while jet fuel was nearing a breakout above $1.75/gal. Across the board, Gulf Coast outright prices are at their highest points since before the COVID-19 pandemic sacked the market.
In the U.S. Northeast, offline Colonial Pipeline gasoline and distillate cash differentials had not yet responded, even as market participants closely followed the news. Physical action was relatively quiet during the final session of the week. Prompt Cycle 24 RBOB trade premiums held steady at 1.5cts/gal above the screen, with implied prices up about two pennies with futures, to approximately $2.15/gal shortly ahead of 1 p.m. ET. Offline ULSD differentials were unchanged at 1ct/gal above the Merc, with prices up about 2cts/gal on paper gains, to roughly $2.02/gal.
--Reporting by Justin Schneewind, jschneewind@opisnet.com; Rachel Stroud-Goodrich, rstroud-goodrich@opisnet.com; Cory Wilchek, cwilchek@opisnet.com
--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com
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