Oil prices extended their decline on Tuesday as concerns over the surge in Covid-19 variants globally mount and markets factored in an additional supply from the Opec+ group of producers.
Brent, the international benchmark, lost about 9 per cent of its value from its settlement on Friday, while West Texas Intermediate, the main US gauge, fell 10 per cent.
The crude markers slipped below $70 per barrel during trading this week after Opec+, a group of oil producers headed by Saudi Arabia and Russia, resolved a weeks-long deadlock and agreed to an output deal.
Brent was trading at $68.80 per barrel at 12.53pm UAE time, while WTI was down to $66.78 per barrel.
The S&P 500 and the Nasdaq composite fell 2.09 per cent and 1.06 per cent in Monday trading. The Dow Jones Industrial Average dropped 1.59 per cent, its worst day since October.
"The sell-off was triggered by an increase in Covid cases caused by the Delta variant, which is currently the most common strain in the majority of countries," Naeem Aslam, chief analyst at AvaTrade, said.
"Oil prices have fallen due to uncertainty about the future outlook of demand for oil, as investors fear the resumption of lockdowns and a boost in supply subsequent to the Opec+ agreement," he added.
The Covid-19 Delta strain has spread rapidly across the developing world and led to renewed restrictions in some countries which had previously contained the spreading of the virus.
In the UK, which is now facing a resurgence of Covid-19 cases, the pound weakened against the dollar to $1.364 on Monday, its lowest level since February. It was trading at 1.367 on Tuesday at 1.18pm UAE time.
"It must be kept in mind that the economic recovery remains fragile with the Bank of England expecting unemployment to rise as the furlough scheme winds down in September," said Lukman Otunuga, senior research analyst at FXTM.
"Surging infections and the uncertainty it presents are the last things the UK economy needs at such a crucial period," he added.
On Sunday, Opec+ agreed to bring 400,000 barrels per day back to the markets in August and will revise baselines used to calculate quotas from May 2022, following requests by several countries, including the UAE.
Under the latest agreement, the UAE's new production baseline will increase to 3.5 million bpd, from 3.168 million bpd previously. Other producers – including Iraq, Kuwait, Saudi Arabia and Russia – will also see their baselines rise.
Oil markets stabilised following a nearly 7 per cent sell-off in the markets during the opening session on Monday.