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Oil spikes as deadly blaze in Mexico slashes output by 420,000 barrels per day

Mexico Pemex refinery oilREUTERS/Henry Romero

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Oil prices jumped on Tuesday as a fire on a Mexican offshore oil rig killed five and cut the country's daily output by nearly a quarter.

Pemex, Mexico's state-owned oil company, said on Monday that about 420,000 barrels per day of oil output — about 0.5% of average global output — had been knocked offline, but projected that the 125 impacted wells could be up and running within days.

West Texas Intermediate oil futures shot up as much as 3.3% on Tuesday to $67.80 per barrel. The two-day rally was even sharper. From Friday's closing price, WTI was up as much as 8.8%.

Another factor boosting oil prices on Tuesday was sunnier feelings about projected oil demand, especially from China, even as spread of the Delta variant continues apace.

"It seems that the concerns about demand that had still predominated last week have lost much of their scare factor, at least for now," analysts at Germany's Commerzbank told the Financial Times. "One key part in this is the clear success that the Chinese authorities are having in combating the spread of the Delta variant."

Iron ore and agricultural commodities also enjoyed a boost on Tuesday, buoyed by more sanguine sentiment about Chinese iron demand and extreme heat killing American corn, soy, and wheat.

 

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