Investing.com - Crude futures fell on Friday, but were on track to notch a second-straight weekly gain ahead of this weekend's G-20 summit between U.S. President Donald Trump and Chinese President Xi Jinping and the OPEC powwow early next week.
On the New York Mercantile Exchange crude futures for August delivery settled 1.6% lower at $58.47, while on London's Intercontinental Exchange, the August contract for Brent, the global benchmark, slipped 0.30% to $65.50. The more active September contract was down 1.6% to $64.52.
With expectations running high that OPEC and its allies are likely to extend oil production cuts for another six months and discuss deepening the curbs at a meeting next week, the G20 meeting between Trump and Xi has taken on increased scrutiny.
Analysts, however, have warned that a negative outcome from the Trump-Xi sitdown could fan trade tensions between the world’s largest two economies and trigger a rocky reaction in oil prices.
An escalation in hostilities between the U.S. and China at the G20 would be bad for oil prices, said Martijn Rats, a strategist at Morgan Stanley.
The global economy would take a further knock if Trump imposes tariffs on the $300 billion worth of Chinese goods that are currently not subject to levies.
Oil prices look set to end the week more than 3% higher thanks to surge earlier in this week when the Energy Information Administration revealed a larger-than-expected draw in domestic supplies.
Over the longer term, the swashbuckling gains in oil prices seen in June, up more than 10%, are unlikely to continue amid a glut in supply.
"It's simply a case that we have an awful lot of oil," Rats said. Non-OPEC countries alone are likely to increase production by 2 million barrels a day this year, he estimates, more than offsetting global demand growth of about 1 million barrels a day.
Production, which continues to flirt with record highs, showed little sign of tailing off as rig counts remain steady.
A report by U.S. energy services firm Baker Hughes showed U.S. oil-rig counts were unchanged at 963 in the latest week.