Oil prices fall, breaking a three-day rally

London — Oil fell on Thursday for the first session this week as renewed concerns about demand amid rising Covid-19 infections cut short a three-day rally, and as Mexico restored some oil production.

Brent crude was down 71c, or 1%, at $71.54 a barrel by 9.39am GMT, having risen 1.7% on Wednesday. US West Texas Intermediate oil was down 78c, or 1.15%, at $67.58 a barrel, after gaining 1.2% in the previous session.

The US Energy Information Administration (EIA) reported that American crude inventories fell last week for a third consecutive week and overall fuel demand increased to the most since March 2020.

But the demand picture is not entirely bullish. “For now, US consumers appear to be shrugging off the spread of the Delta variant ... However, it seems likely that we are near the peak in US demand, which will act as a lid on oil prices,” Capital Economics said in a note.

The return of output in Mexico, where a fire on an offshore platform on Sunday killed at least five workers and knocked out about 400,000 barrels a day of production, is also weighing on prices.

Pemex has recovered 71,000 bbl/day of production and expects to add an additional 110,000 bbl/day on Thursday.

More broadly, fresh Covid-19 outbreaks fuelled by the Delta variant of the coronavirus are raising concerns about the strength of the economic recovery globally.

“Push-and-pull factors have led oil prices to gyrate wildly in recent weeks. Looking ahead, the balancing of cyclical demand headwinds with structural supply tailwinds, leads us to remain neutral-to-bearish on oil prices for the rest of 2021,” said Ehsan Khoman, director at MUFG Bank.

Reuters