At 19.40 hours on 2 Feb 1942 the unescorted and unarmed W.L. Steed (Master Harold G. McAvenia) was hit on the starboard side by two stern torpedoes from U-103 when steaming on a zigzag course at 10,5 knots about 90 miles off the mouth of the Delaware River. The torpedo struck the #3 tank and set the ship on fire, which was soon extinguished by breaking seas. At 20.04 hours, the U-boat fired a coup de grâce which was a tube runner and missed. After the nine officers and 29 crewmen abandoned ship in four lifeboats, the Germans began shelling the tanker with 83 rounds from the deck gun and set her on fire again with 17 hits. At 21.20 hours, a second coup de grâce was fired that hit aft of the bridge and caused the cargo to explode, sending flames 500 feet in the air. The tanker settled by the bow, capsized and sank in about 10 minutes.

The four lifeboats drifted apart in a snowstorm with rough seas and many of the survivors died of exposure in the bad and cold weather. Only the chief and second mates of the 15 survivors in one boat were alive when picked up four days later by the British steam merchant Hartlepool, but the chief mate died ashore in a hospital one day after arriving at Halifax on 9 February while the second mate had to stay in hospital until 28 February. Three of the five men in another boat were picked up after two days by HMS Alcantara (F 88) and landed at Halifax on 7 February. When a third boat with 14 survivors was located on 12 February by the British steam merchant Raby Castle in 37°38N/68°33W, only one of the four men in it was still alive who died three days later and was buried at sea. The four men that cleared the ship first in a boat were never found, only an empty lifeboat was located on 19 February by the Mexican steam tanker Poza Rica northwest of Cape Hatteras.