Collapse of trade talks could have ‘ripple effects’ for oil: Al-Falih

The breakdown in trade talks between the US and China and ongoing tensions between their economies could have “ripple effects” for the oil market, Saudi energy minister Khalid Al-Falih said on Sunday.

Noting that “everybody is concerned” about global trade tensions and the crisis in emerging markets, Al-Falih said he remained confident in the wisdom of global leaders and their ability to tackle current challenges.

“We feel that those issues will be resolved. But if they don’t, and they result in slowing down the global economy, there will certainly be ripple effects on the oil market,” the minister told CNBC.

“We have to be prepared to respond like we have done before in previous macroeconomic issues and tensions that have impacted the oil markets,” he added.

Amid mounting trade tensions, China on Saturday called off planned trade talks with US officials, saying talks cannot occur as long as President Donald Trump continues to threaten imposing new tariffs.

US tariffs on $200 billion worth of Chinese goods go into effect today, as the trade dispute heats up between the world’s two biggest economies.

Separately, Al-Falih said that OPEC and its allies were on track to returning to 100 percent compliance over the next two to three months.

OPEC agreed with Russia and other oil producers in late 2016 to reduce output by a combined 1.8 million barrels per day, in order to reverse the supply glut and shore u crude prices.

In June this year, however, after months of overcompliance with the output cuts, the group agreed to raise production by about 1 mbd by returning to 100 percent compliance.

"We have the consensus that we need to offset reductions and achieve 100 percent compliance, which means we can produce significantly more than we are producing today if there is demand," Al-Falih said.

"The biggest issue is not with the producing countries, it's with the refiners, it's with the demand. We in Saudi Arabia have not seen demand for any additional barrel that we did not produce."