Oil Prices Rise 3% on Mexico Oil Rig Outage & US Vaccine Approval

Oil prices rose 3% on Tuesday on Mexico’s large production outage, as well as full US regulatory approval of COVID-19 vaccines.

Investors became more positive following the US Food and Drug Administration on Monday having issued full approval for the Pfizer/BioNTech two-dose vaccine. Some believe that China's apparent success in fighting the Delta variant of the virus has also reflected on-demand sentiment, with no cases of locally transmitted infections having showed up in the latest data.

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

Additional support for oil prices - a fire on an oil platform off Mexico on Sunday has cut state-run Pemex's oil production by about 25% since then. Prices of heavy sour crude oil grades are rising on the US Gulf Coast as the market braces itself for disruption of supplies from Mexico.

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

Nevertheless, Yawger mentioned that the market could still reverse course if US government data on Wednesday showed gasoline inventories increased. Generally, analysts polled by Reuters expect gasoline inventories to fall, but Yawger in particular expects a gain. Official data from the Energy Information Administration is to be released on Wednesday at 14.30 GMT.

So far, Brent crude oil futures settled up 3.4%, at $71.05 a barrel, while WTI saw a gain of 2.9%, to settle at $67.54.

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