Oil prices plunged more than 10 percent on Friday, the largest one-day drop since April 2020, as a new COVID-19 variant spooked investors and added to concerns that a supply surplus could swell in the first quarter.
Oil fell with global equities markets on fears the variant could dampen economic growth and fuel demand. Britain and European countries have restricted travel from southern Africa, where the variant was detected.
Brent crude fell $8.77, or 10.7%, to $73.45 a barrel by 10:59 a.m. EDT (1459 GMT).
US West Texas Intermediate (WTI) crude was down $9.12, or 11.6%, at $69.27 a barrel, after Thursday's Thanksgiving holiday in the United States.
Both contracts are heading for their fifth week of losses and their steepest falls in absolute terms since April 2020, when WTI turned negative for the first time.
Global authorities reacted with alarm on Friday to a new coronavirus variant detected in South Africa, with the European Union and Britain among those tightening border controls as researchers sought to find out if the mutation was vaccine-resistant.
Hours after Britain banned flights from South Africa and neighbouring countries and asked travellers returning from there to quarantine, the World Health Organization (WHO) cautioned against hasty travel bans.
Investors were also watching China's response to the U.S. release of millions of barrels of oil from strategic reserves in coordination with other large consuming nations, part of its bid to cool prices.
Such a release is likely to swell supplies in coming months, an OPEC source said, based on findings of a panel of experts that advises ministers of the Organization of the Petroleum Exporting Countries.
The Economic Commission Board expects a surplus of 400,000 barrels per day (bpd) in December, rising to 2.3 million bpd in January and 3.7 million bpd in February if consumer nations went ahead with the releases, the OPEC source said.
The forecasts cloud the outlook for a Dec. 2 meeting of OPEC and its allies, known as OPEC+, when the group will discuss whether to adjust its plan to increase output by 400,000 bpd in January and beyond."OPEC's initial assessment of the co-ordinated (stockpile) release and the sudden appearance of a new variant of the coronavirus raises serious concerns about economic growth and the oil balance in coming months," PVM analyst Tamas Varga said.