Oil prices dropped on Monday as two significant developments shook investor confidence. Moody's cut the U.S. sovereign credit rating, and China reported a more meager-than-expected increase in its industrial output and retail sales. Those updates have revived concerns about the health of the world's two largest economies and largest oil consumers.
The price decline comes a week after optimism had returned to the market. Oil prices had risen after a recent trade truce between Beijing and Washington. But new doubts about the economic momentum are now driving the outlook.
Brent crude in late Monday morning trading in London was down 46 cents at $64.95 a barrel, a 0.7% fall. U.S. West Texas Intermediate (WTI) crude was 26 cents lower at $62.23. The June WTI contract expires on Tuesday. Even with the latest decline, both benchmarks ended last week up more than 1%.
UBS analyst Giovanni Staunovo said the weak China data was driving down prices, but that the fall was "mild." Investors had hoped for better numbers from China's April output, but the actual figures were a letdown.
Further downward pressure surfaced following remarks by U.S. Treasury Secretary Scott Bessent. He cautioned that President Trump is prepared to put tariffs in place unless trading partners demonstrate "good faith" in negotiations. The hard-line stance only worsened market anxiety.
"What you're seeing in this market is a wild ride going nowhere," Ole Hansen of Saxo Bank said, referring to the oil market and the Moody's downgrade and Bessent's comments.
Traders are also monitoring developments in the Iran-U.S. nuclear talks. The negotiations over these measures are what is preventing the full collapse of oil prices. Speaking to KAN news on Sunday, U.S. special envoy Steve Witkoff said any agreement with Iran must block uranium enrichment. The comment prompted swift rebuke from Tehran, underscoring the delicacy of the negotiations.
"The nuclear talks could last many months, and they're still unknown," said John Evans, an analyst at oil brokerage PVM.
At the same time, the shipping industry is wrestling with how to come up with alternative fuels, another complication for the energy market.
