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Futures in London tumbled near $71 a barrel after dropping 2.2% last week. Image Credit: Reuters

Dubai: Oil extended declines - falling more than 5 per cent - hampered by the rapid spread of the omicron virus variant and turmoil for President Joe Biden's economic plans.

Futures in London tumbled below $70 a barrel, as wider markets also retreated. Infections are rising from the US to Europe as authorities struggle to tame the spread of omicron. That's led to restrictions on air travel and stricter curbs on movement, creating fears that will flow through to weaker energy demand, though there's no sign of the massive hit seen early last year just yet.

In the US, Senator Joe Manchin blindsided the White House on Sunday by rejecting Biden's roughly $2 trillion tax-and-spending packages, leaving Democrats with few options for reviving it. Goldman Sachs economists cut their US economic growth forecasts after the move.

Oil's market structure is also showing signs of weakness. The prompt timespread for Brent once again flipped into a bearish contango pattern on Monday, indicating the market is becoming oversupplied.

Bearish headwinds are mounting, moving into the holiday period, when thinner trading volumes can exacerbate prices swings. Demand in Asia is softening, central banks are pivoting toward tighter monetary policy to try and rein in accelerating inflation, and President Biden's economic agenda saw a setback after Senator Manchin rejected the spending package.

"It is not a case of if but when governments impose tougher restrictions," Stephen Brennock, an analyst at brokerage PVM Oil Associates, said of the impact of the omicron variant. "Brent is now flirting with contango. This is a clear warning for those of a bullish disposition."

New York state broke a record for new infections and New York City Mayor Bill de Blasio called on the federal government to step up supplies of tests and treatments amid a spike in infections caused by omicron. The Dutch government announced plans to enforce a stricter lockdown, while Germany's health minister warned of another virus wave caused by omicron.