Crude Oil Higher; Mexican Fire Hits Output

© Reuters.

By Peter Nurse

AiVIF.com -- Crude oil prices rose Tuesday, extending recent gains after Mexico suffered a substantial production outage, limiting the potential supply to the global market.

By 9:05 AM ET (1305 GMT), U.S. crude futures were up 1.2% at $66.41 a barrel, while Brent futures were up 1.3% at $69.23 a barrel. Both benchmarks jumped more than 5% on Monday after suffering their biggest week of losses in more than nine months last week.

U.S. Gasoline RBOB Futures were up 1.1% at $2.1470 a gallon.

Helping the market Tuesday was the confirmation that a deadly fire at an offshore platform in the southern Gulf of Mexico, run by Mexico's state-run oil company, Petroleos Mexicanos (Pemex), has halted production, cutting production by 444,000 barrels per day, according to a company document Monday.

“This is equivalent to around a quarter of Mexico’s output,” said analysts at ING, in a note. “The aim of the company is to restore power supply by Wednesday, with the hope that production can resume soon after. An extended outage would likely be supportive for heavier grades of crude oil, with reduced output tightening the market for heavier crude oil.”

This added to Monday’s positive tone generated by the news that the U.S. Food and Drug Administration issued full approval for the Pfizer Inc (NYSE:PFE)/BioNTech SE (NASDAQ:BNTX)Covid vaccine, potentially increasing the likelihood that unvaccinated Americans will take the drug and reducing the need for any more mobility restrictions.

Additionally, China announced no cases of locally transmitted infections reported in the latest data, suggesting the largest crude importer in the world has been successful in controlling the recent outbreak of Covid cases.

The U.S. Department of Energy announced Monday it would sell up to 20 million barrels of crude from the emergency oil reserve, with deliveries to take place between Oct. 1 and Dec. 15.

However, “this planned sale is taking place in order to comply with legislation passed in recent years, rather than the DOE taking action because they believe the U.S. market is tight.” ING added.

Investors now await U.S. crude oil supply data from the American Petroleum Institute, due out at 4:30 PM ET (2030 GMT), amid expectations for a hefty fall in inventories ahead of Labor Day weekend. This report comes a day before the official government weekly petroleum data.