Energy

Oil tumbles 4% on concerns over Europe curbs, rollouts

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Mobile offshore drilling units stand in the Port of Cromarty Firth in Cromarty, U.K., on Tuesday, June 23, 2020.
Jason Alden | Bloomberg | Getty Images

Oil prices fell more than 4% on Tuesday, hit by concerns over new pandemic curbs and slow vaccine rollouts in Europe as well as a stronger dollar.

Brent crude futures were down by $2.61, or 4%, to $62.01 a barrel, having hit a low of $61.41. West Texas Intermediate (WTI) U.S. crude futures fell by $2.71, or 4.4%, to $58.85, after falling to as low as $58.47.

Both contracts traded near lows not seen since February 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. "Continental Europe is tightening the coronavirus measures and thereby further restricting mobility," Commerzbank analysts said. "This is likely to have a correspondingly negative impact on oil demand."

Extended lockdowns are being driven by the threat of a third wave of infections, with a new variant of the coronavirus on the continent.

Germany, Europe's biggest oil consumer, is extending its lockdown until April 18 and asked citizens to stay home to try to stop a third wave of the COVID-19 pandemic.

Nearly a third of France entered a month-long lockdown on Saturday following a jump in COVID-19 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.