Oil gains after cyberattack forces shutdown of crucial US pipelines

Tokyo

CRUDE prices rose on Monday after a major cyberattack forced the shutdown of critical fuel supply pipelines in the United States and highlighted the fragility of its oil infrastructure.

Brent crude was up by 69 cents, or one per cent, at US$68.97 a barrel by 1137 GMT. US West Texas Intermediate (WTI) crude CLc1 rose by 61 cents, or 0.9 per cent, to US$65.51. Both benchmarks rose more than one per cent last week, their second consecutive weekly gain.

Signalling the seriousness of the situation, the White House was working closely with Colonial Pipeline to help it recover from the ransomware attack, which forced the biggest US fuel pipeline operator to shut a network supplying populous eastern states.

"The major takeaway is the bad guys are very adept at finding new ways to penetrate infrastructure," Andrew Lipow, president of Lipow Oil Associates told Reuters. "Infrastructure has not developed defences that can offset all the different ways that malware can infect one's system."

Colonial's network is the source of nearly half of the US East Coast's fuel supply, transporting 2.5 million barrels per day of petrol and other fuels, and the company had to shut all its pipelines after the cyber attack last Friday, which involved ransomware.

US petrol prices jumped nearly 2 per cent on Monday, while heating oil was up by more than one per cent.

It was not clear who carried out the attack, but sources told Reuters the hackers were likely a professional cybercriminal group.

Colonial said on Sunday its main fuel lines remain offline but some smaller lines between terminals and delivery points are now operational. It didn't say when the network might return to full operational capacity.

A prolonged shutdown of the line, described as the "jugular of infrastructure" in the United States by one analyst, would cause retail prices to spike at petrol pumps ahead of peak summer driving season, a potential blow to US consumers and the economy.

"We expect the pipeline to restart in a few days, and therefore have a limited impact on refineries in Louisiana and eastern Texas having to cut runs," said Energy Aspects analyst Virendra Chauhan, noting also that US fuel inventories are "comfortable". The attack has prompted calls from American lawmakers to strengthen protections for critical US energy infrastructure from hacking attacks.

The Department of Energy said it was monitoring potential impacts to the nation's energy supply, while the US Cybersecurity and Infrastructure Security Agency and the Transportation Security Administration told Reuters they were working on the situation.

Goldman Sachs said it expects oil demand to reach pre-pandemic levels by the end of this year and predicted that Brent would hit US$80 a barrel and WTI US$77 a barrel within six months.

"We see the global oil market deficit, currently around 1 MB/D widen significantly from here," Goldman analysts said in a note. "We still expect oil demand to reach 100 MB/D by the end of this year," they said. REUTERS