Oil prices dived more than 5% on Friday as a new Covid-19 variant spooked investors and added to concerns that a supply surplus could swell in early 2022.

Oil fell with global equities markets on fears the variant, which Britain said scientists considered the most significant found to date, could restrict travel and dampen economic growth and fuel demand.

Investors were also watching China's response to the US release of millions of barrels of oil from strategic reserves in coordination with other large consuming nations, part of its bid to cool prices.

Such a release is likely to swell supplies in coming months, an OPEC source said.

Iranian production was also in focus, with indirect talks due to resume on Monday between Iran and the United States on reviving a 2015 nuclear deal that could lead to the lifting of U.S. sanctions on Iranian oil exports.

However, the failure of Iran and the International Atomic Energy Agency to reach even a modest agreement on monitoring of Tehran's nuclear facilities this week bodes poorly for next week's talks, Eurasia analyst Henry Rome said.

The forecasts cloud the outlook for a Dec. 2 meeting of OPEC and its allies, known as OPEC+, when the group will discuss whether to adjust its plan to increase output by 400,000 bpd in January and beyond.

Reporting by Reuters