Oil settles up 3%, boosted by Mexican oil rig outage, US vaccine approval

[NEW YORK] Oil prices rose 3 per cent on Tuesday, supported after Mexico suffered a large production outage due to a fire on an oil platform and also by full US regulatory approval of vaccines for Covid-19.

Brent crude oil futures settled up US$2.30 or 3.4 per cent at US$71.05 a barrel, while US West Texas Intermediate (WTI) gained US$1.90 or 2.9 per cent to settle at US$67.54.

Oil is up more than 8 per cent for the week, clawing back the 7.6 per cent lost last week, the biggest weekly decline in more than nine months.

Investors took a more upbeat view on the continued fight against the virus after the US Food and Drug Administration on Monday issued full approval for the Pfizer/BioNTech two-dose vaccine, having authorised it for emergency use last December.

Analysts said China's apparent success in fighting the Delta variant of the coronavirus also boosted demand sentiment, with no cases of locally transmitted infections in the latest data.

"Concerns are easing that we will not see a global shutdown due to the Delta variant," said Gary Cunningham, director of market research at Tradition Energy in Stamford, Connecticut.

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Also supporting oil prices, a fire on an oil platform off Mexico on Sunday has cut state-run Pemex's oil production by about 25 per cent since then. Five workers died and the fire halted 421,000 barrels per day of production.

Prices of heavy sour crude oil grades are rising on the US Gulf Coast, traders said, as the market braces for a disruption of supplies from Mexico.

"The market is getting a tailwind from the Pemex fire, which has greenlighted this rally," said Bob Yawger, director of energy futures at Mizuho in New York.

Still, Mr Yawger cautioned that the market could reverse course if US government data on Wednesday shows petrol inventories increased. Analysts polled by Reuters expect petrol inventories to fall, but Mr Yawger expects a gain, which could signal a demand lull.

Data from trade group the American Petroleum Institute on Tuesday showed crude inventories fell 1.6 million barrels, while petrol stockpiles fell one million barrels, traders said. Prices were little changed in post-settlement trade following the data.

Official data from the Energy Information Administration is due to be released on Wednesday at 10.30am ET (2.30pm GMT).

The US Department of Energy on Monday said it would sell up to 20 million barrels of crude from the Strategic Petroleum Reserve oil stocks to comply with legislation, with deliveries to take place between Oct 1 and Dec 15.

Meanwhile, Indian refiners' crude throughput in July bounced to its highest in three months as fuel demand rebounded and buoyed prices.

REUTERS