Oil prices rose 3% on Tuesday, supported after Mexico suffered a large production outage due to a fire on an oil platform and also by full U.S. regulatory approval of vaccines for COVID-19.
Brent crude oil futures settled up $2.30, or 3.4%, at $71.05 a barrel, while U.S. West Texas Intermediate (WTI) gained $1.90, or 2.9%, to settle at $67.54.
Oil is up more than 8% for the week, clawing back the 7.6% lost last week, the biggest weekly decline in more than nine months.
Investors took a more upbeat view on the continued fight against the virus after the U.S. Food and Drug Administration on Monday issued full approval for the Pfizer/BioNTech two-dose vaccine, having authorized it for emergency use last December.
Analysts said China's apparent success in fighting the Delta variant of the coronavirus also boosted demand sentiment, with no cases of locally transmitted infections in the latest data.
"Concerns are easing that we will not see a global shutdown due to the Delta variant," said Gary Cunningham, director of market research at Tradition Energy in Stamford, Connecticut.
Also supporting 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. Five workers died and the fire halted 421,000 barrels per day of production.
Prices of heavy sour crude oil grades are rising on the U.S. Gulf Coast, traders said, as the market braces for a disruption of supplies from Mexico.
"The market is getting a tailwind from the PEMEX fire, which has greenlighted this rally," said Bob Yawger, director of energy futures at Mizuho in New York.
Still, Yawger cautioned that the market could reverse course if U.S. government data on Wednesday shows gasoline inventories increased. Analysts polled by Reuters expect gasoline inventories to fall, but Yawger expects a gain, which could signal a demand lull.
Data from trade group the American Petroleum Institute on Tuesdayshowed crude inventories fell 1.6 million barrels, while gasoline stockpiles fell 1 million barrels, traders said. Prices were little changed in post-settlement trade following the data. Official data from the Energy Information Administration is due to be released on Wednesday at 10:30 a.m. ET (1430 GMT).
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.
Additional reporting by Jessica Jaganathan in Singapore and Ahmad Ghaddar in London Editing by John Stonestreet, David Goodman, David Gregorio and Jonathan Oatis