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Brent crude futures dropped by $2.20, or 3.4%, to $62.42 a
barrel by 0948 GMT. U.S. West Texas Intermediate (WTI) crude
futures fell by $2.10, or %3.4, to $59.46 a barrel.
The market structure was also pointing to weakness, with the
front-month Brent spread flipping 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 said.
"This is likely to have a correspondingly negative impact on oil
demand," they added.
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.
This comes after nearly a third of French people 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, National
Australia Bank's head of commodity research.
(Additional reporting by Sonali Paul in Melbourne; Editing by
Susan Fenton)
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