Oil prices edged lower in early trading on Monday following Moody’s downgrade of the U.S. sovereign credit rating and fresh concerns over China’s economic recovery.
The shift in sentiment dragged Brent and WTI futures down, as investors weighed the implications of fiscal instability in the U.S. and slowing growth in China — the world’s two largest oil consumers.
Brent crude oil, against which Nigerian oil is priced, declined by 51 cents, or 0.8% to $64.90 per barrel by 07:30 a.m. in Nigeria while U.S. West Texas Intermediate (WTI) crude dropped 45 cents or 0.7% to $62.04 per barrel.
The downturn follows Moody’s decision on Friday to downgrade the U.S. credit rating over its escalating $36 trillion federal debt burden. The ratings agency cited fiscal policy challenges and structural deficits as key risks heightened investor caution.
Priyanka Sachdeva, Senior Market Analyst at Phillip Nova, noted that the downgrade may not directly impact oil demand but has injected caution across broader financial markets.
“The Moody’s downgrade raises concerns about the trajectory of the U.S. economy and adds to the prevailing uncertainty in global markets,” she said.
Meanwhile, data released by Chinese authorities indicated that industrial output in April grew at a slower pace, although slightly above analysts’ expectations.
Retail sales also showed signs of losing momentum, casting doubts on the strength of domestic demand.
“The data points to a bumpy recovery path for China,” added Sachdeva. “While Beijing’s stimulus efforts are ongoing, the impact on oil consumption could be muted in the near term.”
Oil prices had gained over 1% last week after the U.S. and China agreed to a temporary pause in their trade dispute, rolling back some import tariffs.
However, the short-term relief has been overshadowed by persistent economic and geopolitical risks.
In the Middle East, the outcome of renewed nuclear negotiations between the United States and Iran remains uncertain. U.S. special envoy Steve Witkoff stated on Sunday that any future agreement must include Tehran’s commitment to halting uranium enrichment. The comment triggered swift criticism from Iranian officials, reducing market optimism for a breakthrough.
“There was a lot of hope built into those talks,” said Tony Sycamore, Market Analyst at IG. “But the likelihood of Iran abandoning its nuclear ambitions has always been minimal, particularly amid the regional collapse of its strategic proxies.”
Elsewhere, geopolitical tensions escalated in Europe after Russia detained a Greek-owned oil tanker that had recently departed from an Estonian Baltic Sea port. The incident raised fresh concerns over energy supply security in the region.
In the United States, oil producers trimmed their rig count by one to 473 last week, marking the lowest level since January, according to data from Baker Hughes. The reduction signals continued capital discipline among U.S. shale operators, with firms prioritizing shareholder returns and cost controls over aggressive production expansion.
Despite near-term headwinds, analysts note that oil market fundamentals remain relatively balanced, with OPEC+ maintaining supply discipline and global demand holding steady, albeit at a slower growth rate.
Investors will be closely monitoring developments surrounding U.S. fiscal negotiations, China’s economic indicators, and Iran-U.S. diplomatic efforts as key drivers of oil price movement in the coming weeks.
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