Brent crude futures were down $2.56, or 4%, to $62.08 a barrel by 12:16 p.m. ET (1616 GMT), having hit a low of $61.41. West Texas Intermediate crude (WTI) fell $2.65, or 4.3%, to $58.91, after falling to as low as $58.47.
Both benchmarks traded near lows not seen since Feb. 12.
The front-month Brent spread flipped into a small contango for the first time since January. Contango is where the front-month contracts are cheaper than future months, and could encourage traders to put oil into storage.
“The road to oil demand recovery appears to be full of obstacles as the world continues to fight the COVID-19 pandemic,” Bjornar Tonhaugen, head of oil markets at Rystad Energy. “Oil prices are declining again on Tuesday, proving that last week’s correction was not deep enough and that the market had been trading lately with an excessively bullish sentiment, overlooking the pandemic’s risk,” he said.
Extended lockdowns in Europe are being driven by the threat of a third wave, with a new variant of the coronavirus on the continent.
Germany, Europe’s biggest oil consumer, is extending its lockdown until April 18.
Nearly a third of France entered a month-long lockdown on Saturday following a jump in cases in Paris and parts of northern France.
A stronger U.S. dollar also weighed on prices. As oil in priced in U.S. dollars, a stronger greenback makes oil more expensive for holders of other currencies.
Physical crude markets are indicating that demand is lower, much more so than the futures market.
“Physical prices have been weaker than futures have been suggesting for several weeks now,” said Lachlan Shaw, head of commodity research and National Australia Bank.
