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Oil Prices Build on Rebound as Demand Worries Fade

Oil futures rose Tuesday, extending a bounce from last week’s rout, on signs the spread of the coronavirus delta variant may be abating in China, analysts said.

Also, a fire on an oil platform in Mexico knocked around a quarter of that nation’s daily crude output offline.

West Texas Intermediate crude for October delivery rose $1.01, or 1.5%, to $66.65 a barrel on the New York Mercantile Exchange, after jumping more than 5% Monday as it broke a seven-day losing streak. October Brent crude, the global benchmark, was up $1.11, or 1.6%, at $69.86 a barrel on ICE Futures Europe.

China on Monday reported zero new COVID-19 cases for the first time since July, news reports said, after taking aggressive steps to contain the spread of the disease when a cluster of infections was found last month in the eastern city of Nanjing.

“This suggests that the worst of the latest outbreak in China may be behind us. Concern about oil demand may now start to ease,” said Warren Patterson, head of commodities strategy at ING, in a note.

A fire Sunday on an offshore platform in the Gulf of Mexico operated by Petróleos Mexicanos, or Pemex, killed five workers, injured six, and resulted in the shutdown of 125 wells, Reuters reported. The shutdown took 421,000 barrels a day of production offline, equivalent to around a quarter of Mexico’s output.

The report said Pemex plans to reconnect power to the facility and wells by Wednesday.

“An extended outage would likely be supportive for heavier grades of crude oil, with reduced output tightening the market” for those grades, Patterson wrote.

Source: Marketwatch