Oil prices retreated on Monday after U.S. and Chinese officials outlined a trade deal framework aimed at preventing new tariffs and easing tensions between the world’s two largest economies.
Brent crude oil, against which Nigerian oil is priced, declined by 75 cents, or 1.1% to $65.19 a barrel by 08:58 a.m., while U.S. West Texas Intermediate (WTI) crude futures slipped 71 cents, or 1.2% to $60.79.
The pullback follows last week’s strong rally that saw Brent and WTI gain 8.9% and 7.7%, respectively, as sanctions on Russian energy firms lifted supply concerns.
U.S. Treasury Secretary Scott Bessent confirmed on Sunday that Washington and Beijing had reached a “substantial framework” to guide upcoming trade discussions.
The framework reportedly avoids the implementation of 100% tariffs on Chinese goods and secures a deferral of China’s rare-earth export controls. Market participants interpreted this development as a significant step toward stabilizing global trade flows and mitigating downside risks to global economic growth.
The agreement comes at a time when investors were closely monitoring geopolitical risks in the energy sector. Tensions had mounted in recent weeks following new U.S. and European Union sanctions on Rosneft and Lukoil, two of Russia’s largest oil producers.
Analysts say that any diplomatic progress between major global economies could help offset some of the uncertainty surrounding global oil supply.
According to Tony Sycamore, market analyst at IG Group, “The trade framework helps allay fears that escalating tariffs or export restrictions could dampen energy demand. It also limits the extent to which Russia can offset Western sanctions by offering deeper discounts or deploying shadow fleets to attract buyers.”
However, not all analysts share the same optimism. Yang An, an energy strategist at Haitong Securities, cautioned that “if sanctions on Russian energy prove less effective than expected, oversupply pressures could quickly return to the market.”
An indicated that Russia may still find alternative buyers, particularly in Asia, where energy demand remains robust despite economic headwinds.
Meanwhile, within the Organization of the Petroleum Exporting Countries (OPEC), internal negotiations continued over production levels.
Iraq, one of OPEC’s largest producers, disclosed ongoing discussions regarding its output quota, with Oil Minister Hayan Abdel-Ghani noting that Baghdad was reviewing its capacity, which currently stands at 5.5 million barrels per day.
OPEC, which collectively accounts for nearly half of global oil production, has shifted focus in recent months toward maintaining market share after previously cutting production to stabilize prices. The group’s strategic recalibration has kept a ceiling on prices despite geopolitical tensions and Western sanctions targeting Russian crude.
Market watchers said Monday’s price decline represents a temporary cooling after last week’s sharp rally driven by sanctions.
“The market appears to be digesting a mix of positive trade signals and ongoing geopolitical risks,” said John Evans, analyst at PVM Oil Associates. “While short-term sentiment has improved, traders remain cautious about whether the impact of Russian sanctions has been fully priced in.”
Energy traders expect volatility to persist in the near term as global markets weigh the trade deal framework’s durability against possible disruptions from sanctions, OPEC production decisions, and fluctuations in demand from key economies.
With China and the U.S. together accounting for more than one-third of global oil consumption, analysts say sustained cooperation between both nations could significantly influence price stability in the months ahead.
However, lingering questions over enforcement of sanctions, the resilience of Russian exports, and OPEC’s production stance continue to cloud the long-term outlook.