Tuesday November 1, 2016
Colonial Pipeline has shut its two main product lines in rural Alabama after an incident on yesterday afternoon that breached the gasoline pipeline. Several injuries were reported, with, regrettably, one fatality, and a 30-acre forest fire ensued after the explosion. Response crews have built an earthen dam to control the burning fuel. Ironically, the breach occurred a few miles from the pipeline leak in September, but is on the same pipeline (the gasoline line, or "Line 1"). The September leak and yesterday's explosion appear to be unrelated, however.
The NYMEX futures market, which had been very soft to close out the month of October (five of the last six days in the month were negative), roofed on this news. While WTI is relatively unchanged, the finished products (RBOB and Heating Oil contracts) have moved higher. December RBOB (now prompt) is currently up over 15 cents (roughly 10 percent) after being up 20 cents at one point. December HO is up a nickel.
The September pipeline leak caused product shortages in some Southeast markets during the second half of September, but the market appears to have been relatively well supplied in October. It is far too early to tell how long Colonial will keep the pipelines shut after Monday's event. We will keep you updated.
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