U.S. crude futures are more than 10% below last week’s multiyear peak, a drop that marks correction territory.


Kyle Grillot/Bloomberg News

Oil prices slid Monday morning, heading for their biggest one-day drop in four months as investors worried that the spread of the Delta variant of coronavirus will halt travel and dent demand for fuel.

U.S. crude futures were recently down 6.4% at $66.98 a barrel, on track for their worst day since mid-March. Prices are now more than 10% below last week’s multiyear peak, a drop that marks correction territory. They are still up sharply for the year.

Traders in recent days have unwound some wagers that oil demand will continue to climb as more consumers get vaccinated and resume normal travel patterns. Hopes for a demand surge have buoyed oil throughout the year, but rapidly climbing coronavirus cases in some parts of the world are forcing investors to pare back their expectations for the economy. Some traders also remain wary of more travel shutdowns, which would have an outsize impact on oil prices.

“If we stagnate or retrace some of the demand increase we’ve seen thus far, the market will move from being undersupplied to oversupplied into the back half of the year,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth, U.S.

Brent crude, the global gauge of oil prices, was recently down 5.7% at $69.41 a barrel.

Oil’s tumble came as stocks also fell on concerns about the economy. Investors on Monday sought shelter in ultrasafe government bonds, pushing down the yield on the benchmark 10-year U.S. Treasury note to around 1.2%. Yields fall as bond prices climb.

Energy traders also were weighing the news that large global suppliers are set to gradually raise output in the months ahead. The Organization of the Petroleum Exporting Countries and allies including Russia agreed to ease production curtailments in response to a recent demand recovery, though the Delta variant’s course could change the group’s plans.

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