Oil up 2% on brighter demand outlook and Mexican outage

© Reuters. FILE PHOTO: A sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

By Ahmad Ghaddar

LONDON (Reuters) -Oil prices rose on Tuesday, extending sharp gains on a bullish demand outlook as U.S. regulators issued their first full approval for a COVID-19 vaccine and Mexico suffered a large production outage.

Brent crude oil futures were up $1.50, or 2.2%, at $70.25 a barrel by 13442 GMT while U.S. West Texas Intermediate (WTI) gained $1.34, or 2%, to $66.98.

Both benchmarks jumped more than 5% on Monday, helped by a weaker dollar, after marking their biggest weekly losses in more than nine months last week.

Though a resurgent pandemic has fuelled health system concerns, "economically harmful containment measures seem rather unlikely", said Julius Baer analyst Norbert Rucker, citing the effectiveness of coronavirus vaccines.

The U.S. Food and Drug Administration (FDA) on Monday issued full approval for the Pfizer/BioNTech two-dose vaccine, having authorised it for emergency use last December. Health officials hope the action will convince unvaccinated Americans that the shot is safe and effective.

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

Also supporting oil prices was a fire on an oil platform off Mexico on Sunday. The fire killed five workers and halted 421,000 barrels per day of production, representing about a quarter of the country's overall output.

The U.S. Department of Energy on Monday said it would sell up to 20 million barrels of crude from the Strategic Petroleum Reserve (SPR) 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.