A pumpjack operates at the Vermilion Energy site in Trigueres, France, June 14, 2024. REUTERS/Benoit Tessier

By Mohi Narayan and Yuka Obayashi

NEW DELHI (Reuters) -Oil prices dipped in early trade on Friday, trimming part of the previous day's surge but remaining on track for a weekly gain, as fresh U.S. sanctions on Russia's two biggest oil companies over the war in Ukraine fuelled supply concerns.

Brent crude futures fell 36 cents, or 0.55%, to $65.63 at 0333 GMT. U.S. West Texas Intermediate crude futures were down 33 cents, or 0.58%, at $61.43.

"Crude is levelling off, some profit-taking is setting in, indicating the market is not hitting the panic button over Russian supply," said Vandana Hari, the founder of oil market analysis provider Vanda Insights.

"It is likely to be wait-and-watch mode, until the next twist in the saga, that could be an escalation or a de-escalation," Hari added. "Looks like the market is betting on the latter."

Both benchmarks jumped more than 5% on Thursday and were set for about a 7% weekly gain, the biggest since mid-June.

Russian President Vladimir Putin remained defiant on Thursday after U.S. President Donald Trump hit Russia's Rosneft and Lukoil with sanctions to pressure the Kremlin leader to end the war in Ukraine. Rosneft and Lukoil together account for more than 5% of global oil output.

The U.S. sanctions prompted Chinese state oil majors to suspend Russian oil purchases in the short term, trade sources told Reuters. Refiners in India, the largest buyer of seaborne Russian oil, are set to sharply cut their crude imports, according to industry sources.

"Flows to India are at risk in particular ... challenges to Chinese refiners would be more muted, considering the diversification of crude sources and stock availability," said Janiv Shah, a vice president of oil markets analysis at Rystad Energy, in a note.

Kuwait's oil minister said that the Organization of the Petroleum Exporting Countries would be ready to offset any shortage in the market by rolling back output cuts.

The U.S. said it was prepared to take further action, while Putin derided the sanctions as an unfriendly act, saying they would not significantly affect the Russian economy and talked up Russia's importance to the global market.

Britain sanctioned Rosneft and Lukoil last week and the European Union approved a 19th package of sanctions against Russia that includes a ban on imports of Russian liquefied natural gas.

The EU also added two Chinese refiners with a combined capacity of 600,000 barrels per day (bpd), as well as Chinaoil Hong Kong, a trading arm of PetroChina, to its Russian sanctions list, its official journal showed on Thursday.

Russia was the world's second-biggest crude oil producer in 2024 after the U.S., according to U.S. energy data.

Investors are also focusing on a planned meeting between Trump and Chinese President Xi Jinping next week.

Trade tensions between Washington and Beijing have been escalating, marked by tit-for-tat retaliatory measures announced by both sides. Confirmation that the two leaders would meet next week appeared to ease those tensions.

(Reporting by Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo; Editing by Stephen Coates and Thomas Derpinghaus)