Colonial Pipeline Seeks to Restore Its East Coast Fuel Service by Weekend

The market response was volatile, with gasoline futures in New York up about 0.2% at $2.13 a gallon Monday, after they had advanced as much as 4.2% in overnight trading. Analysts said prices for gasoline, particularly spot prices in regions affected by the closure, could continue to rise if the pipeline isn’t back in service in a few more days.

Even a roughly weeklong delay could reduce the amount of fuel held in stockpiles. That would likely amplify pressure on consumers at the pump with demand set to rise in the coming weeks as more motorists travel after receiving coronavirus vaccines, said Bob Yawger, director of the future division at Mizuho Securities USA.

“That’s still significant enough to make a difference,” he said. “This just shows how fragile the situation is.”

“Every hour counts at this point as we get closer and closer to Memorial Day weekend,” he added.

Patrick De Haan, head of petroleum analysis at price tracker GasBuddy, said crimped fuel supplies over the next few days would have the biggest impact in Georgia, North Carolina, South Carolina and Tennessee, all of which are highly dependent on the pipeline. Much of Tennessee’s fuel comes from lateral lines that extend from Colonial’s main line, he said.

Gasoline prices could rise 3 to 7 cents a gallon this week in affected areas such as Mississippi and Tennessee, as well as in East Coast states from Georgia to Delaware, according to AAA.

Gasoline futures are already up more than 50% in 2021, and average U.S. prices at the pump have climbed steadily and are approaching multiyear highs around $3 a gallon, data from GasBuddy show.

“This is happening at the worst time, heading into the summer, and also to the most vulnerable area,” said Michael Tran, managing director for global energy strategy at RBC Capital Markets. The East Coast is the least energy-secure U.S. region because of the dearth of refineries there, he said.

Traders were also preparing for a rise in European fuel exports to the U.S. Shipments from the continent have tended to rise following similar disruptions, including a 2016 Colonial Pipeline shutdown following a leak.

Colonial said Sunday that some smaller lateral lines between terminals and delivery points were once again operational. Its main lines remained offline as it was working to restore information-technology systems and developing a plan to restart the pipeline when it had approval from federal regulators.

The Biden administration responded to the shutdown by issuing an emergency waiver Sunday that extended hours for truck drivers delivering fuel across 17 states, including Texas, where fuel supplies typically get ferried from refineries to the East Coast.

The cybersecurity recovery for the Colonial pipeline could take a few more days and possibly longer, said Marc Ayala, a director of industrial control system security at consulting firm 1898 & Co., part of Burns & McDonnell in Houston.

“Given the breadth of the unknowns, the discovery, containment, decontamination and remediation effort will be lengthy and likely result in a gradual return to operations,” Mr. Ayala said.

Elsewhere in energy markets, U.S. crude-oil futures swung between small gains and losses and were recently up 0.1% at $64.96 a barrel. They have also risen this year amid expectations for surging demand. The pipeline shutdown could actually have mixed impacts on oil prices if gasoline builds up in the Gulf Coast because refineries in the region might not need to take in as much crude to turn it into fuel products, analysts said.

Write to Collin Eaton at [email protected] and Amrith Ramkumar at [email protected]