Oil prices fell by more than 1 per cent on Tuesday, extending falls from the previous session, as global financial markets headed south in the wake of Wall Street's biggest one-day decline since 2011.
Brent crude oil futures were at $66.88 per barrel at 0236 GMT, down 74 cents, or 1.1 per cent, from the previous close and more than $4 below their high point for 2018, hit last month.
US West Texas Intermediate (WTI) crude futures were at $63.31 a barrel. That was down 84 cents, or 1.3 percent, from their last settlement, and more than $3 off their 2018 high.
Financial markets went into a tailspin on Monday when US stocks plunged in highly volatile trading which saw the Dow Jones Industrial Average tumble by almost 1,600 points in intra-day trading as investors grappled with rising bond yields and potentially firming inflation.
"Suddenly, inflation has become one of the most-talked about issues in markets," US bank J.
P. Morgan said in a note to clients.
However, the correction in oil is more than a reaction to a sell-off in financial markets.
Despite efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia to withhold production since January last year in order to tighten the market and prop up prices, crude supplies remain relatively ample.
That's largely due to soaring US oil production, which has jumped by almost 18 percent since mid-2016 to 10 million barrels per day (bpd) - surpassing output by leading exporter Saudi Arabia.
Only Russia produces more, averaging 10.98 million bpd in 2017.
What's more, there are indications that US oil production will rise further: the amount of rigs drilling for oil fields rose to 765 by late January, easily more than double the 316 that were in operation during 2016's production lull.
There is also a seasonal downturn to demand, as many refineries shut down for maintenance following the upcoming end to the peak consumption winter heating season in the northern hemisphere.
The largest US refinery, Motiva Enterprises' 603,000 bpd Port Arthur facility in Texas, began a planned one-month overhaul on Monday of its key crude oil processing unit.
Consequently, hedge fund managers have cut their bullish exposure to petroleum for the first time in six weeks.