U.S. crude oil price dropped sharply on Monday as Standard & Poor's cut the U.S. credit outlook to negative and the largest OPEC oil producer Saudi Arabia confirmed an output drop in March on weaker demand, Xinhua reported.
The S&P left its AAA rating for U.S. credit unchanged, but lowered its outlook on U.S. debt from "stable" to "negative," citing "material risks" that U.S. policymakers might fail to deal with the rising budget deficits and debt.
The New York-based rating agency said in a report on Monday: " If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns."
Meanwhile, Saudi Arabia confirmed on Sunday it had cut output by more than 800,000 barrels per day in March as it thought the market was oversupplied, because the high oil price has hurt the demand.
Besides, oil investors worried about China's economic growth after the world second largest economy tightened its monetary policy on Sunday by raising the banks' reserve ratio by 50 basis points to fight high inflation.
Light, sweet crude for May delivery lost 2.54 dollars, or 2.32 percent, to settle at 107.12 dollars a barrel on the New York Mercantile Exchange. In London, Brent crude for June delivery also plunged and last traded below 122 dollars a barrel.