Traders also weighed potential outcomes for Thursday’s OPEC+ decision on crude production levels, and digested data Wednesday from the Energy Information Administration, which revealed a smaller-than-expected weekly decline in U.S. crude inventories. The turn lower for prices late in the session was linked to growing concerns over COVID-19, and the potential for the new variant to disrupt economic activity and oil demand, said Tariq Zahir, managing member at Tyche Capital Advisors.

Investors were also focused on a pending decision on output levels by the Organization of the Petroleum Exporting Countries. OPEC and its allies, together known as OPEC+, will hold a ministerial meeting on Thursday. Zahir said told MarketWatch he expects OPEC+ to pause the monthly 400,000 barrel-per-day increase that’s currently in place. “We are still in a wait-and-see mode with the severity and impact of the new COVID strain,” he said. Any travel restrictions resulting from the new variant could impact oil demand going forward, said Zahir. “Until we get a clear understanding on the impact of the new COVID strain, oil…will be choppy.”

November marked the biggest monthly declines for front-month WTI — down 21% — and Brent crude — off 16% — since March 2020, the start of the COVID-19 pandemic as per the World Health Organization. The following month, WTI crashed below zero dollars a barrell. February Brent crude, the global benchmark, lost 36 cents, or 0.5%, to $68.87 a barrel on ICE Futures Europe, following a loss of nearly 5.5% Tuesday.

The Energy Information Administration reported on Wednesday that U.S. Crude inventories fell by 900,000 barrels for the week ended Nov. 26. On average, analysts had forecast a 2.7 million-barrel decline, according to a poll conducted by S&P Global Platts. The American Petrolem Institute on Tuesday reported a 747,000-barrel decrease, according to sources. The EIA also reported weekly inventory increases of 4 million barrels for gasoline and 2.2 million barrels for distillates. The S&P Global Platts survey expected supply climbs of 900,000 barrels gasoline and 1 million barrels for distillates. The “unexpected and rather large build” in gasoline and at the Cushing, Okla., storage hub were surprises, Zahir told MarketWatch.EIA data showed crude stocks at the Cushing, Okla., Nymex delivery hub edged up by 1.1 million barrels for the week.

Meanwhile, OPEC held technical meeting on Wednesday and was scheduled to hold another on Thursday, just ahead of the OPEC and non-OPEC ministerial meeting, which is also set for Thursday. In his opening address to the OPEC Conference Wednesday,  Dr. Diamantino Pedro Azevedo, Angola’s minister of mineral resources and petroleum and president of the OPEC Conference, said the COVID-19 pandemic “remains a persistent foe which continues to spook the markets,” and that the “sudden appearance of a potentially new and more dangerous variant comes on top of new lock downs” in parts of Europe.

“Bottom line for oil, omicron is causing significant volatility in the energy complex as the impact on demand is not yet known, but traders seem to be fearing the worst so far this week, especially given the lack of clarity on how OPEC+ will react to the latest COVID and [Strategic Petroleum Reserve] release developments at their policy meeting this week,” analysts at Sevens Report Research wrote in Wednesday’s newsletter. “WTI futures have become oversold, and support in the mid-$60 [a] barrel area, which dates back to the August lows, remains intact,” they said. “This suggests we may see the market stabilize or even bounce from here.”

West Texas Intermediate crude for January delivery dropped $10.24, or 13.1%, to close at $68.15 a barrel on the New York Mercantile Exchange, the biggest one-day drop for a front-month contract since April 20, 2020, according to Dow Jones Market Data. A holiday trading environment was blamed for amplifying price swings, in a shortened session on the heels of the U.S. holiday on Thursday. Trading in U.S. oil futures closed an hour early at 1:30 p.m. Eastern. January Brent crude the global benchmark, fell $9.50, or 11.6%, to $72.72 a barrel on ICE Futures Europe, the biggest one-day percentage decline since April 21, 2020. Both WTI and Brent saw their lowest close since Sept. 9.

Oil’s fall, along with sharp losses for U.S stocks as well as European and Asian equities, came after the discovery of a new coronavirus varient with a high level of mutations in South Africa, which has been experiencing a massive spike in cases in recent days.

Some analysts saw the selloff as overdone. “Traders are putting the fear of this new strain ahead of the reality. While we have to take it seriously, oil should find a floor in the $72 area,” said Phil Flynn, analyst at Price Futures Group, in a note.“The worries are still that U.S. volume today will be light but the markets look to be ahead of the risk even though we are not even close to understanding how bad this new variant might be,” he said.

December gasoline fell 12.5% to $2.0294 a gallon, while December heating oil dropped 12.1% to $2.0945 a gallon.

Dubbed the “omicron” variant by the World Health Organization, it had also been detected in Botswana and Hong Kong in travelers who had visited South Africa. The World Health Organization held an emergency meeting on Friday to assess the variant, which scientists aren’t sure is more deadly or to what degree it might be more easily transmissible. But scientists say it is the most heavily mutated variant so far, which could make it more transmissible than the delta variant which plagued the U.S. and Europe in the summer and autumn. Already countries were taking precautionary measures, with the U.K. halting travelers from South Africa and five other nations from Friday. The variant shock comes as Europe has been battling a spike in cases across many countries, such as the economic powerhouse Germany. Austria has locked down its population, while other countries are also rolling out restrictions. “Depending on how this virus-led selloff evolves, and how concerned the WHO is of it, the calculations surrounding the OPEC+ meeting next week could change,” said Jeffrey Halley, senior market analyst at OANDA.

“OPEC+ has stated repeatedly that one area of caution was the resurgence of COVID-19 eroding oil demand as the grouping raises production,” he told clients in a note. Traders have been questioning whether Organization of the Petroleum Exporting Countries and its allies — called OPEC+, will decide next week to scrap those output increases after a coordinated release of strategic reserves by several countries, including the U.S. The cartel and its allies has previously pushed back against requests by the Biden administration and others to speed up production increases. OPEC+ has boosted output in monthly increments of 400,000 barrels a day as it unwinds earlier production cuts.

The U.S. Energy Information Administration said crude inventories rose 1 million barrels in the week ended Nov. 19, while gasoline stocks fell 600,000 barrels and distillates rose 2 million barrels. Analysts surveyed by S&P Global Platts, on average, had looked for crude inventories to fall by 1.3 million barrels, while gasoline stocks were seen unchanged and distillates had been expected to fall by 900,000 barrels.

The American Petroleum Institute, a trade group, late Tuesday said oil stocks rose 2.3 million barrels last week, while gasoline supplies rose 600,000 barrels and distillate supplies fell 1.5 million barrels, according to Dow Jones Newswires. WTI and Brent both put in strong gains Tuesday, after the Biden administration announced it would release 50 million barrels of crude from the Strategic Petroleum Reserve in an effort joined by China, India, Japan, South Korea and the U.K. to push down soaring energy prices. “Yesterday’s price response can be explained by the fact that this step had been anticipated for days, a sword of Damocles that had caused oil prices to fall sharply beforehand,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.

The Organization of the Petroleum Exporting Countries and its allies — or OPEC+ — is due to meet next week. OPEC+ had rebuffed calls by the Biden administration and others to speed up production increases. OPEC+ has boosted output in monthly increments of 400,000 barrels a day as it unwinds earlier production cuts. Now, traders wonder if OPEC+ will scrap planned increases in response to the release of strategic reserves.

It is unclear, however, whether the U.S. will place the entire 50 million barrels on the market since, under the swap arrangement being used, it must first be taken by private oil companies and then returned, with interest, at a later date, Fritsch said. “If there is no acute supply shortage, the companies in question are hardly likely to take advantage of this option unless they are given some additional incentive. It is perfectly conceivable therefore that the targeted figure of 50 million barrels will not nearly be used up in its entirety,” he said. “Given the API data, the risks are for this expected [draw] in inventories to not be met and we may even see a small build in crude inventories,” said Chris Weston, head of research at Pepperstone. “Still, we’re not seeing any real worry in the crude price from the API data here. A build in inventories of over 3 million barrels would be a risk for crude longs.”

U.S. markets are closed Thursday for the Thanksgiving Day holiday. That means traders saw a raft of data earlier than usual, including the EIA’s weekly natural-gas report, which showed a 21 billion cubic foot withdrawal last week. Analysts surveyed by S&P Global Platts were looking for a 23 billion cubic foot withdrawal.

Weekly data from Baker Hughes, which is usually released on Friday, showed the number of U.S. oil rigs rose by 6 to 467.

December gasoline futures fell 0.8% to $2.3197 a gallon, while December heating oil declined 0.1% to close at $2.383 a gallon.