The Philadelphia Energy Solutions oil refinery. Picture: REUTERS / LAILA KEARNEY
The Philadelphia Energy Solutions oil refinery. Picture: REUTERS / LAILA KEARNEY

London — Oil slid to about $66 a barrel on Thursday, pressured by concerns over whether the Group of 20 (G20) summit will produce a breakthrough on trade and perceptions that supply is ample despite the prospect of continued Opec curbs.

US President Donald Trump said on Wednesday that a trade deal with Chinese President Xi Jinping was possible this weekend but that he was prepared to impose US tariffs on most remaining Chinese imports if the two countries did not agree.

"A complete breakdown of the talks will have a negative impact on the financial markets and also on oil, but the sell-off in risky assets should be short-lived," said Tamas Varga of oil broker PVM.

"Oil bulls might have to wait until the second half of next week to start firing from all cylinders."

Brent crude, the global benchmark, was down 61 US cents at $65.88 by 8.40am GMT. US West Texas Intermediate crude fell 35c to $59.03.

Oil jumped more than 2% on Wednesday after the latest US petroleum supply report showed a larger-than-expected drop in crude stocks. Inventories fell 12.8-million barrels, more than the 2.5-million barrel decrease analysts had expected.

Nonetheless, supply remains sufficient in the world's biggest oil consumer.

"US oil inventories remain well above the five-year average, signalling a well-supplied market," said Carsten Menke of Swiss bank Julius Baer. "Demand still looks soft, while the supply situation remains fragile."

Traders said uncertainty over a trade breakthrough at the G20 — which could translate into a stronger oil demand outlook — and doubts about continued output cuts by Opec and its allies were crimping follow-through buying.

"It would be unwise to be unprepared for a possible scenario where talks descend into disagreements on trade," said Lukman Otunuga, research analyst at FXTM.

"Such an outcome will most likely rattle financial markets as concerns over slowing global growth and sizzling trade tensions fuel risk aversion."

After the G20 summit ends on Saturday, the Opec and allies including Russia meet on Monday and Tuesday to discuss an extension of production cuts to support prices.

The alliance, known as Opec+, is widely expected to keep the same level of supply cuts in the second half of 2019, though other outcomes are possible.