Global oil prices are nearing four-year lows as escalating tensions in the US-China trade dispute have raised fears of a global economic slowdown, limiting gains from improved equity markets.
Brent crude rose by 33 cents, or 0.5 percent, to $64.54 a barrel on Tuesday, while US West Texas Intermediate (WTI) gained 41 cents, or 0.7 percent, to $61.11.
This mild rebound followed after both benchmarks fell by more than 14 percent on Monday, triggered by US President Donald Trump’s announcement of reciprocal tariffs on all imports.
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China fired back, calling Washington’s actions “blackmail” and vowing to “fight to the end” unless the US rolls back its 34 percent retaliatory tariffs. This aggressive clap back has deepened worries about the strength of global oil demand, especially as investors brace for a possible recession.
“Given this increasingly hostile tone, the risk of recession continues to rise, which in turn dims the outlook for global oil demand,” SEB analyst Ole Hvalbye told Reuters.
The European Union has also joined the trade war, proposing counter-tariffs of 25 percent on a range of US products in response to Washington’s tariffs on steel and aluminium. The tension has rocked global markets and triggered a wave of concern over weakening oil demand.
Although oil prices have made a brief rebound, ING analyst Warren Patterson described the move as a “relief rally,” adding that the market had already “sold off heavily in recent days” and was still uncertain about the true extent of the expected demand hit.
Implications for Nigeria
As Africa’s largest oil producer, Nigeria depends heavily on crude oil revenues to fund its budget and support its foreign exchange reserves.
Jide Pratt, COO of Aiona and country manager at TradeGrid, said the current drop in oil prices exposes the country’s vulnerability to oil price shocks and underscores the urgency of economic diversification.
According to him, oversupply concerns, partly driven by the Organisation of Petroleum Exporting Countries’ decision to ramp up production, are also weighing on prices.
“Sadly for Nigeria, it means lower revenues, lower foreign reserves and with the cease of the Naira for crude then we could see increase in foreign exchange rates as we have which doesn’t help neither monetary nor Fiscal policy” Pratt said.
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He added that Nigeria may be forced to revisit its 2025 budget assumptions of $75, turn to supplementary budgets or loans, and prioritise structural reforms to cushion the impact.
“There’s a need to give more attention to sectors like agriculture, trade, and fintech, and consider asset sales to the private sector to drive growth,” Pratt said.