WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange charged higher in early trade Wednesday, boosting the U.S. crude benchmark above $66 per barrel (bbl) and gasoline over $2.15 gallon on reports of panic buying in parts of the southeast following more than four days with the Colonial Pipeline shut down, a critical U.S. artery in delivering gasoline, diesel and jet fuel along the Atlantic coastline, sending fuel demand soaring as much as 20% at a time when petroleum stockpiles are declining in line with their seasonal trend.
Traders expect gasoline stockpiles to be sharply drawn down amid the shutdown of the nation's largest supply network, a 5,500-mile 2.5 million barrels per day (bpd) pipeline system, that prompted widespread panic buying in parts of southeast and elsewhere. In just five states served by Colonial Pipeline -- Georgia, Florida, South Carolina, North Carolina, and Virginia -- gasoline demand was up by a collective 40.1%, lifting nationwide consumption by 20% from the week prior.
According to GasBuddy, 12.3% of gas stations in North Carolina, and 8.6% in Virginia, didn't have gasoline Tuesday night.
To help alleviate potential shortages, Biden Administration eased fuel regulations governing the sale of gasoline in three states and the nation's capital on Tuesday. The move could help bring more fuel to the area that is normally well supplied by the Colonial Pipeline system.
Energy Secretary Jennifer Granholm pleaded with Americans not to hoard gas as the pipeline attempts to resume operations.
"Let me emphasize...there was no cause to hoard gas in light of the fact that the pipeline should be substantially operational by the end of this week and over the weekend," said Granholm.
Colonial Pipeline said it continues to make forward progress to restore service, with additional laterals operating manually to deliver existing inventories to markets along the pipeline.
"Markets experiencing supply constraints and/or not serviced by other fuel delivery systems are being prioritized. Since our pipeline system was taken offline, working with our shippers, Colonial has delivered approximately 967,000 barrels (41 million gallons) to various delivery points along our system. This includes delivery into the following markets: Atlanta, Georgia, Belton and Spartanburg, South Carolina, Charlotte and Greensboro, North Carolina, Baltimore, Maryland, and Woodbury and Linden New Jersey," said the company in a statement Tuesday night.
Also late Tuesday, the American Petroleum reported commercial crude oil inventories fell a more than expected 2.533 million bbl during the week ended May 7 and stocks at Cushing, Oklahoma, the delivery point for the West Texas Intermediate futures contract, declined 1.209 million bbl. Somewhat offsetting that drop, gasoline supplies surged 5.640 million bbl in the reviewed week, missing estimates for a decrease of 600,000 bbl while distillate inventories fell 872,000 bbl, below calls for a drop of 1.2 million bbl.
Wednesday morning, the International Energy Agency revised lower its 2021 global demand forecast by 270,000 bbl to 5.4 million bpd, driven by downward revisions in first quarter consumption in the United States and European Union. IEA also cut its second quarter forecast for oil demand by India by 630,000 bpd or 13% to 4.3 million bpd as the country struggles with high coronavirus infection rates.
Despite downward revisions, the agency still expects demand to outstrip supply later this year, adding that vaccination rollout programs, rebounding economic activity, and easing transport restrictions across major global economies will fuel growth. The forecast for the second half of the year is largely unchanged on the assumption the situation in India and elsewhere improves.
In early trade, NYMEX June West Texas Intermediate futures gained 83 cents to $66.10 bbl, and the international crude benchmark Brent contract for July delivery advanced 79 cents to $69.31 bbl. NYMEX June RBOB moved up 0.98 cent to $2.1491 gallon, and NYMEX June ULSD futures rallied 1.10 cents to $2.0527 gallon.
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