Oil fell to around $66 a barrel on Thursday, weighed down by concerns over whether the G20 summit will produce a breakthrough on trade and perceptions that supply is ample despite prospects for continued OPEC curbs.
U.S. President Donald Trump said on Wednesday a trade deal with Chinese President Xi Jinping was possible this weekend but he is prepared to impose U.S. tariffs on most remaining Chinese imports if the two countries don't agree.
"It's all about the G20," said Craig Erlam, analyst at OANDA. "It's clear that investors are a little cautious when it comes to this meeting, given how talks collapsed previously and the fighting talk we've since seen from both sides."
Brent crude, the global benchmark, was down 11 cents at $66.38 by 1321 GMT. U.S. West Texas Intermediate crude fell 26 cents to $59.12.
Oil jumped by more than 2% on Wednesday after the latest U.S. petroleum supply report showed a larger-than-expected drop in crude stocks. Inventories fell 12.8 million barrels, which was more than the 2.5 million barrel fall analysts had expected.
Nonetheless, supply remains sufficient in the world's biggest
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 Organization of the Petroleum Exporting Countries and allies including Russia meet on Monday and Tuesday to discuss an extension of production cuts to support prices.
Iraq's"It has been effective to a certain level to minimise the glut in the market, but there are now ideas or calls for agreeing even more,"
oil minister said in London OPEC was expected to roll over the deal and discuss deepening the curbs. Iraq is the second country after Algeria to mention the idea of a bigger reduction. Oil Minister Thamer Ghadhban said.