Heavy crude prices rise as Pemex fire roils U.S. market, traders say

By Devika Krishna Kumar

NEW YORK, Aug 24 (Reuters) - Prices of heavy sour crude oil grades are rising in the U.S. Gulf Coast, traders said, as the market braces for a disruption of supplies from Mexico in the wake of a fire that has cut state-run Pemex's oil output by about 25% since Sunday.

At least five workers were killed and six injured in the blaze, which broke out on an offshore platform in the southern Gulf of Mexico operated by Petroleos Mexicanos, halting production of more than 400,000 barrels per day (bpd), the company said on Monday.

It could take days for output and flows to return to normal, people familiar with the matter said, even as work is underway to restore power to the facility by Wednesday, and later connect 125 idled wells at the Ku-Maloob-Zaap cluster, Mexico's largest.

Pemex did not reply to a request for comment.

U.S. Gulf Coast sour crude grades including Mars have begun rising as U.S. refiners begin to seek replacement barrels for the lost Mexican supplies, traders said.

Mars crude had traded at the weakest levels in about a month before the fire , but prices on Tuesday were seen trading at a $2.35 discount to benchmark futures, stronger than the $2.65 discount on Monday, dealers said.

Heavy grades such as Western Canadian Select (WCS) in Alberta also have started to strengthen on news of the outage, traders said.

U.S. oil refiners Chevron Corp (CVX), Phillips 66 and Valero Energy (VLO) are scheduled to receive Mexican crude cargoes in coming days, the people said.

Valero aims to load a cargo on Tuesday in Mexico, sourcing the barrels from onshore Pemex storage tanks at the Pajaritos terminal in the Gulf Coast, market sources said.

The companies did not immediately respond to requests for comment. (Reporting by Devika Krishna Kumar in New York and Marianna Parraga in Houston, Ana Isabel Martinez in Mexico City; additional reporting by Erwin Seba, Laura Sanicola Editing by Paul Simao)

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