Oil fell on Aug. 26 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 71 cents, or 1%, at $71.54 a barrel by 0939 GMT, having risen 1.7% on Aug. 25.

U.S. West Texas Intermediate oil was down 77 cents, or 1.10%, at $67.59 a barrel, after gaining 1.2% in the previous session.

The U.S. 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, U.S. consumers appear to be shrugging off the spread of the Delta variant ... However, it seems likely that we are near the peak in U.S. 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 Aug. 22 on an offshore platform killed at least five workers and knocked out a bit more than 400,000 barrels per day (bbl/d) of production, is also weighing on prices.

Pemex had so far recovered 71,000 bbl/d of production and expects to add an additional 110,000 bbl/d within a few hours.

More broadly, fresh COVID-19 outbreaks fueled 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," Ehsan Khoman, director at MUFG Bank, said.

Federal Reserve Chair Jerome Powell's highly anticipated speech to the Jackson Hole economic conference on Aug. 27 will likely offer few new hints about when the U.S. central bank may start reducing its massive asset purchases.

Next week, OPEC will meet on Sept. 1 to decide its policy amid calls from the United States to add more barrels to the market to help the global economic recovery.