Oil prices tumbled more than 3% on Monday as a fast-spreading new coronavirus strain that has shut down much of Britain and led to tighter restrictions in Europe sparked worries about a slower recovery in fuel demand.
Brent crude was down $1.85, or 3.5%, at $50.41 a barrel by 11:06 a.m. ET (1606 GMT,) while U.S. West Texas Intermediate (WTI) crude for delivery in January fell $1.79, or 3.7%, to $47.31 ahead of expiry.
The more active February WTI contract fell $1.83, or 3.7%, to $47.41 a barrel.
Both contracts had lost as much as $3 earlier in the session, their biggest daily drop in six months.
“Reports of a new strain of the coronavirus has weighed on risk sentiment and oil. New mobility restrictions across Europe are also not helping as European oil demand will suffer,” said UBS oil analyst Giovanni Staunovo.
“Investors need to be mindful that the road to higher oil demand and prices will remain bumpy.”
Brent climbed above $50 last week for the first time since March, buoyed by optimism stemming from COVID-19 vaccines.
But a new COVID-19 strain, said to be up to 70% more transmissible than the original, has renewed fears about the virus, which has killed about 1.7 million people worldwide.
More countries closed their borders to Britain on Monday, causing travel chaos and raising the prospect of UK food shortages.
“The new strain of the coronavirus in the UK has shown us that the vaccine optimism holding Brent above $50 per barrel could be deflated in a fleeting moment,” said Rystad Energy analyst Louise Dickson.
The new virus strain has already been detected in other countries, including Australia, the Netherlands and Italy.
Russian Deputy Prime Minister Alexander Novak said the new strain had an impact on oil prices, adding that recovery of global oil markets was happening more slowly than previously expected and could take two to three years.
“Travel restrictions over the next several weeks will complicate OPEC+ plans to gradually raise output,” said Edward Moya, senior market analyst at OANDA in New York.
“The monthly meetings will be very tense and keep oil prices volatile until the virus spread is under control across both Europe and the U.S.”
The negative sentiment overshadowed the rollout of a new vaccine in the United States, a deal among U.S. congressional leaders for a $900 billion coronavirus aid package and European regulatory approval on Monday for the use of the COVID-19 vaccine jointly developed by U.S. company Pfizer and its German partner BioNTech.
The approval by Europe’s medicines regulator puts the region on course to start inoculations within a week.