Oil down 1%; pandemic surge, renewed Mexico supply end rally

© Reuters. FILE PHOTO: A gas pump is seen hanging from the ceiling at a petrol station in Seoul June 27, 2011. REUTERS/Jo Yong-Hak

By Laura Sanicola

NEW YORK (Reuters) -Oil fell 1% on Thursday as renewed concerns about demand due to rising COVID-19 infections cut short a three-day rally, and as Mexico restored some oil production after a fire disrupted supplies.

Brent crude was down 78 cents, or 1.1%, at $71.47 a barrel by 11:25 a.m. EDT (1525 GMT). U.S. West Texas Intermediate oil was down 77 cents, or 1.10%, at $67.59 a barrel.

"Increasing production and a significant slowing in “return to office” trends will remain as significant obstacles that could contain WTI below the $72 area and Brent under the $75 mark well into the 4th quarter," said Jim Ritterbusch, president of Ritterbusch and Associates LLP in Galena, Illinois.

On Wednesday, Brent rose 1.2% and U.S. crude jumped 1.7%, as the U.S. Energy Information Administration (EIA) reported that American crude inventories fell last week for a third straight week and overall fuel demand increased to the most since March 2020.

Yet fresh COVID-19 outbreaks fueled by the Delta variant of the coronavirus are raising concerns about the strength of the economic recovery globally. And restored output in Mexico also weighed on prices which had been buoyed after a fire on Sunday on an offshore platform knocked out more than 400,000 barrels per day (bpd) of production.

On Thursday, Mexican President Andres Manuel Lopez Obrador said state oil firm Petroleos Mexicanos (Pemex) will produce an average of 1.8 million barrels per day (bpd) by year end, despite the fire.

Pemex had so far recovered 71,000 bpd of production and expects to add an additional 110,000 bpd within a few hours.

On Friday, investors will watch Federal Reserve Chair Jerome Powell speak to the Jackson Hole economic conference, but few expect hints about when the U.S. central bank may start reducing asset purchases.

Next week, the Organization of the Petroleum Exporting Countries will meet on Sept. 1 to decide its policy amid calls from the United States to add more barrels to the market to help the global economic recovery.