By Barani Krishnan
Investing.com – It’s been a volatile week for oil as the Colonial Pipeline saga and the associated boom-bust-boom in gasoline from that played against the backdrop of India’s festering Covid situation.
With Friday’s settlement, the bulls in crude could heave a sigh of relief: It was another winning week. In fact, the third in a row.
New York-traded , the benchmark for U.S. crude, settled at $65.37, up $1.55, or 2.4%. The rally helped offset a chunk of Thursday’s 3.4% drop — which was WTI’s worst one-day decline since April 5.
For the week, the U.S. crude benchmark gained 0.7%, adding to last week’s 2.1% advance and the prior week’s 2.3% rise.
London-traded , the global benchmark for crude, hovered at $68.68 by 2:45 PM ET (18:45 GMT), up $1.63, or 2.4%, on the day. Brent dropped 3.3% in the previous session, also its most since April 5.
For the week, the global crude benchmark showed a gain of 0.6%, adding to last week’s 1.5% advance and the prior week’s 1.7% rise.
Friday’s rebound in oil was helped by short-covering on the previous day’s activity and a second day of broad gains on Wall Street after three prior days of carnage.
Also fueling the market — literally — was optimism about gasoline demand in the next two weeks before the May 31 Memorial Day holiday in the U.S., which typically serves as the starting gun for the summer race in oil prices as demand peaks from Americans setting out on long road trips.
The American Automobile Association expects as many as 37 million road travelers on this Memorial Day, up 60% from last year’s pandemic-suppressed 23 million.
“The restart of the pipeline is very positive news for motorists,” AAA spokesperson Jeanette McGee said as Colonial resumed its work of delivering fuel to 45% of the U.S. East Coast after a six-day shutdown.
“While impact won’t be seen immediately and motorists in affected areas can expect to see a few more days of limited fuel supply, relief is coming,” McGee said. “Station pumps will be full of fuel in several days. This is an especially good update ahead of the Memorial Day holiday.”
The pipeline was downed by a cyberattack and reopened after its operator reportedly paid a $5 million ransom to the hackers of its system. Neither the company nor the White House, which initially intervened in the matter, have confirmed the payment of any ransom.
The outage initially caused a 3% spike in gasoline futures that spilled over into the crude market as many pumps across the East Coast ran out of fuel. Many of those gains evaporated on Thursday’s news of the pipeline’s reopening. On Friday, gasoline futures were back up 1.3%, hovering at $2.12 per gallon.
The pump price of gasoline remained not far from this week’s seven-year high of around $3 per gallon.
“The national average is likely to continue to see fluctuation in the coming days and states where prices have spiked will see some relief as the pipeline becomes fully operational,” said Phil Flynn, energy analyst at the Price Futures Group brokerage in Chicago.
Aside from gasoline, the market’s focus was on the Covid situation in India, the world’s third biggest oil consumer, where 4,000 people died from the virus for the third straight day and total infections crossed 24 million.
India is in the grip of the highly transmissible B.1.617 variant of the coronavirus, first detected there and now appearing across the globe. Prime Minister Narendra Modi said his government was “on a war footing” to try to contain the strain.
“India remains a key theme for the energy markets and as their curve slowly bends, that will lead to a complicated increase in production,” Ed Moya, analyst at OANDA, said.
“WTI crude seems poised to be stuck in the mid-$60s, but if the weakness accelerates, that could be enough to trigger a move above the March high of $67.98.”