Oil prices plunged about $10 a barrel on Friday, their 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, as researchers sought to find out if the mutation was vaccine-resistant.
The World Health Organization has designated the new variant as "of concern," according to the South African health minister.
Brent crude fell $9.21, or 11.2 per cent, to $73.02 a barrel. U.S. West Texas Intermediate (WTI) crude was down $10.10, or 12.9 per cent, at $68.29 a barrel, after Thursday's Thanksgiving holiday in the United States.
Both contracts were 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.
The variant in South Africa emerged over the U.S. Thanksgiving Holiday, causing ructions in a market previously caught between producer and consumer nations.
Traders were eyeing whether U.S. crude oil settles below $70 on Friday, a technical support for the market. "The obvious response to a worrisome new variant is to clamp down on international travel again which is a killer for the oil complex," said John Kilduff, Partner at Again Capital LLC in New York.
OPEC+ is monitoring developments around the new coronavirus variant, sources said on Friday, with some expressing concern that it may worsen the oil market outlook less than a week before a meeting to set policy.
Prices rose early in the week as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) suggested it could taper production in response to a strategic release from large consuming countries that are members of the International Energy Agency.
Such a release was likely to swell supplies in coming months, an OPEC source said, based on findings of a panel of experts that advises OPEC ministers.
The forecasts cloud the outlook for a Dec. 2 meeting when the group will discuss whether to adjust its plan to increase output by 400,000 barrels per day 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.