Oil dropped as U.S. President Donald Trump said planned trade talks with China next month could be called off.

(Bloomberg) -- Oil dropped as U.S.

President Donald Trump said planned trade talks with China next month could be called off, stoking concerns the deepening dispute will damage global growth.

Futures lost as much as 0.7% in New York, snapping a two-day gain. Trump’s threat to came after the International Monetary Fund on Friday warned of to the Chinese economy if trade tensions escalate. Oil rallied late last week after Saudi Arabia said it would constrain exports in September after signaling it would to halt the price slump.

Crude has dropped more than 7% so far this month as fears the U.S.-China spat may expand into a currency war eclipsed concerns of supply disruptions in the Middle East. The International Energy Agency on Friday its forecasts for oil-demand growth this year and next, and warned that it may lower the estimates further as the trade conflict drags on.

“Oil continues to be sensitive to trade war rhetoric,’’ Alfonso Esparza, a senior buy Wellhead market analyst at Oanda Corp., said in a note. “Saudi Arabia is willing to do more to prevent a free fall, but hard to imagine what that would look like. The prolonged trade war has been a negative factor for global growth estimates.’’

West Texas Intermediate crude for September delivery fell 25 cents to $54.25 a barrel on the New York Mercantile Exchange as of 7:24 a.m. London time. The contract advanced 3.7% to settle at $54.50 on Friday, trimming a second weekly loss.

Brent for October settlement retreated 23 cents, or 0.4%, to $58.30 on the ICE Futures Europe Exchange. The contract added $1.15 to close at $58.53 on Friday, trimming the weekly loss to 5.4%. The global benchmark crude traded at a $4.19 premium to WTI for the same month.

Trump said earlier this month that new tariffs on Chinese imports will take effect Sept. 1, shattering a truce reached with President Xi Jinping weeks earlier and unleashing tit-for-tat actions on trade and currency policy that risk accelerating a wider geopolitical fight between the two countries.

Saudi Arabia plans to keep crude exports 7 million barrels a day next month as it allocates less oil than customers demand, unidentified officials from the kingdom said last week. State-run Saudi Aramco will provide customers across all regions with 700,000 barrels a day less than they requested, the officials said.

--With assistance from James Thornhill.

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Ben Sharples, Aaron Clark