The accident occurred just before 6:00 AM (7:00 AM EST) when oil spilling from a breached pipeline quickly burst into a fireball that flattened homes and wrecked cars in San Martin Texmelucan, a small community in the state of Puebla about 50 miles east of Mexico City. 

"Several streets were flooded with fuel. With a spark, there was a river of fire", said Valentin Meneses, interior minister of the state of Puebla. 

Pemex, the state oil monopoly that controls the pipeline, said fuel thieves could have touched off the deadly explosion that was quickly controlled after the initial detonation.

"We are not discounting mechanical problems but, on the other hand, we have had problems with illegal taps this year including along that stretch" of pipe, said Pemex chief Juan Jose Suarez. 

Among the 27 dead are 12 children, officials said, while 51 people are injured. The explosion also destroyed 32 houses with about 70 more homes damaged, according to officials. 

The explosion occurred in a residential neighborhood which is not near major oil refining or transportation facilities, according to local media reports.