Oil price tumbles 6% on new supply and surge in Delta variant cases 

Oil prices dropped by more than $4 a barrel after Opec and allies agreed to boost output, stocking fears of a surplus as rising Covid infections in many countries threaten demand

The Organisation of the Petroleum Exporting Countries and its allies, known as Opec+, reached a compromise over the weekend to increase oil supply, which had hit its highest level this month in more than two years. File picture

Oil prices plunged 6%, or by more than $4 a barrel, for their worst day since March, after Opec and allies agreed to boost output, stoking fears of a surplus as rising Covid infections in many countries threaten demand.

Crude oil's year-long surge has been sputtering for most of the last two weeks with the prospect of new supply undermining the case for higher prices. With the Delta variant of the coronavirus spreading, funds bailed out of long positions. Brent crude lost $4.23 at $69.36 a barrel. 

The Organisation of the Petroleum Exporting Countries and its allies, known as Opec+, reached a compromise over the weekend to increase oil supply, which had hit its highest level this month in more than two years.

Goldman Sachs reiterated that it sees more upside to the market. 

It said the Opec agreement was in line with its view that producers "should focus on maintaining a tight physical market, all the while guiding for higher future capacity and disincentivising competing investments".

However, the Opec deal removes more of the supply curbs that have been a cornerstone of the market for a year. 

"Longer-term, free and additional production capacities from Opec+ countries are the key reason why we see oil moving lower again," said Julius Baer analyst Carsten Menke. 

•Reuters