Oil prices were down sharply in early afternoon trading on the East Coast of the US on Monday, as a combination of concerns over the impact of the Omicron variant of the Covid-19 virus and a major setback for the Biden Administration’s Build Back Better bill weighed on commodities.

West Texas Intermediate crude prices were down $4.49 per barrel, or 6.34%, to $66.37 while Brent crude prices were down $3.87, or 5.26%, to $69.65 per barrel. That extends the price decline from last week, as the Omicron variant began to rapidly spread across Europe.

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The situation worsened over the weekend, with The Netherlands reinstating a lockdown and Israel reinstating a travel ban from the US and Canada as Covid cases in both countries spiked.

“Oil prices are getting pummelled again as sentiment turns south and countries ponder deepening restrictions and lockdowns,” OANDA senior market analyst Craig Erlam said in a Monday commentary.

“None of this bodes well for crude demand in the first quarter of the year.”

The level of uncertainty in the global economy caused by the Omicron variant has many investors on the sideline, unwilling to buy into oil until a greater level of clarity is achieved.

“Fundamental buyers have yet to step in on energy and will likely not do so until oil volatility stabilises and concerns around the omicron variant of Covid start to abate,” KeyBank analyst Leo Mariani said.

US markets were also reverberating from the news that the critical vote for passage of the Biden administration’s $1.75 trillion spending bill - Senator Joe Manchin of West Virginia - had formally declared his opposition to the measure.

During an interview on “Fox News Sunday", Manchin, a Democrat, said he could not vote for the bill in its current form, meaning the measure does not have the votes needed for passage in the Senate.

Even with the sharp decline in prices Monday, there are signs US oil producers are moving to increase activity.

The weekly oil and gas rig count by Baker Hughes indicated that there were 579 active rigs in the US at the end of last week, the highest number since April 2020.