The rally in the U.S. dollar is also impacting prices
In a repeat of the sentiment that caused massive losses for crude last week, traders fearful that rising Covid Delta infections in some parts of the world will derail demand recovery caused oil on Monday to drop by over 2 percent.
Brent fell $1.66, or 2.4 percent, to settle at $69.04 per barrel, while West Texas Intermediate lost $1.80, or 2.6 percent, to settle at $66.48.
Ironically, the plummet was exacerbated by a rally in the U.S. dollar, which was a direct result of demand strength as exhibited by a stronger than expected jobs report released Friday.
Amrita Sen, head of research, Energy Aspects
This is not going to last more than a couple of weeks
The source of Monday's angst - that China reported a total of 125 new infections, up from 96 a day earlier - prompted Goldman Sachs, JPMorgan, and Morgan Stanley to cut their growth forecasts for that country (China is one of several countries that have a zero Covid infection strategy, something most virologists say will be impossible to achieve)
Craig Erlam, senior analyst at OANDA, said, "Rising Chinese Delta cases and restrictions has cast doubt over the economy in the short-term."
Commerzbank noted that China imported 9.7 million barrels per day (bpd) in July, the fourth straight month below 10 million bpd: "Market participants are watching the rising coronavirus figures in Asia with considerable alarm, as this could prompt the Chinese government to take drastic measures."
Amrita Sen, head of research at Energy Aspects, proved to be the sole voice of calm amid the gloom and doom on Monday; she told Bloomberg television that the world is still "drawing down inventories in huge amounts," and will enter next year at "very tight inventory levels."
She added that she understands the fears surrounding Delta, but "for now, all the numbers we're seeing at least on the oil demand side and talking with contacts within China, yes, there are localized lockdowns, but only 15 areas have been hard hit.....we're not looking at nation wide lockdowns, and in areas where vaccination programs are high, you're not seeing the impact on hospitals.
"We are very confident...that this is not going to last more than a couple of weeks, and the government in China will be able to get this under control."