Global oil prices fell sharply on Wednesday, hitting their lowest levels since February 2021, as escalating trade tensions between the United States and China, the world’s two largest economies, dampened demand expectations.
Rising supply levels added further pressure on the market, triggering fresh concerns about a potential global oil glut.
According to Reuters, as of 4:23 a.m. GMT, Brent crude futures declined by $2.38 (3.79%) to $60.44 per barrel, while U.S. West Texas Intermediate (WTI) crude futures dropped $2.46 (4.13%) to $57.12.
Both benchmarks have now fallen for five consecutive trading sessions.
The Brent six-month spread also narrowed sharply to just $0.79, its lowest since mid-November 2024 — a steep fall from the $5.69 peak recorded in January, signaling that the market is increasingly pricing in a surplus.
The bearish momentum followed the implementation of President Donald Trump’s 104% tariffs on Chinese imports, which took effect from 12:01 a.m. EDT on Wednesday.
“China’s aggressive retaliation diminishes the chances of a quick deal between the world’s two biggest economies, triggering mounting fears of economic recession across the globe,” said Ye Lin, Vice President of Oil Commodity Markets at Rystad Energy.
Adding to the market’s woes, OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies like Russia, agreed last week to increase production by 411,000 bpd in May, a move widely seen as contributing to potential oversupply.
In its latest outlook, Goldman Sachs projects that Brent could dip to $62 by the end of 2025 and $55 by the end of 2026, with WTI following a similar trajectory.
The recent plunge in oil prices presents a major risk for Nigeria’s oil-dependent economy. With crude oil contributing about 80% of government revenues and 95% of foreign exchange earnings, prolonged price weakness could exacerbate fiscal pressures and threaten macroeconomic stability.
At current prices, Nigeria’s 2025 budget benchmark oil price of $75 per barrel is significantly above Brent’s current level of around $60.