Oil prices slipped Monday, reversing some of last week’s gains, as markets digested renewed economic uncertainty in the U.S. and China, along with signals of rising global crude supply.
As of 08:15 ET (12:15 GMT), Brent crude futures for June delivery were down 0.7% at $64.93 a barrel, while West Texas Intermediate (WTI) futures dropped by the same margin to $61.53. The decline follows a 1% weekly gain last week, fueled by optimism after the U.S. and China agreed to temporarily reduce tariffs on each other.
Moody’s Downgrade Adds Pressure
A key drag on sentiment came from Moody’s downgrade of the U.S. sovereign credit rating from ‘Aaa’ to ‘Aa1’ late last week. The agency flagged escalating national debt—now topping $36 trillion—as a major concern, with the situation likely to deteriorate further if former President Donald Trump’s proposed tax cuts are implemented.
The downgrade prompted caution among energy traders, especially as it came amid broader signals that oil supply may increase in the coming months.
Iran Deal Could Add to Oversupply
President Trump also claimed last week that the U.S. is close to reaching a nuclear agreement with Iran, which could lead to the lifting of sanctions. If confirmed, a deal could result in a substantial influx of Iranian oil into global markets—worsening oversupply worries.
Mixed Chinese Economic Signals
Meanwhile, fresh economic data out of China painted a mixed picture. Industrial output in April grew faster than expected, suggesting that factory activity remains resilient despite heightened U.S. trade tariffs. However, retail sales disappointed, underlining persistent weakness in domestic demand.
As the world’s largest oil importer, China’s sluggish consumption trends continue to weigh heavily on global oil demand expectations.
Ukraine Peace Talks in Focus
Markets are also eyeing a scheduled call between President Trump and Russian President Vladimir Putin regarding the war in Ukraine. While analysts at ING noted that even a peace deal would only lead to a limited increase in Russian oil supply, it remains a variable that could influence energy markets.
Further complicating the outlook, the International Energy Agency (IEA) warned last week that oil supply is set to grow faster than expected in 2025 as OPEC+ continues to unwind production cuts. At the same time, the agency lowered its global demand growth forecasts for the second half of the year.
Together, the signals are pointing to a fragile balance in the oil market, with traders wary of potential oversupply amid a backdrop of economic and geopolitical uncertainty.