Oil Prices Steady as Traders Await Trump Decision on Canadian Oil Tariffs
Oil prices pared earlier gains to trade little changed as U.S. President Donald Trump moved quickly to impose tariffs on Canada and Mexico, but left traders guessing whether that would include crude.
West Texas Intermediate crude futures were below $73. Trump has said he will follow through on his threat to impose 25% levies on imports from the two countries, and will also target China. While he flagged an imminent decision on whether crude would be included, no specifics have emerged.
The inclusion of crude would risk major reverberations across the oil market. Canada ships about 4 million barrels a day to the U.S., and the two countries’ energy markets are closely integrated, with refiners in the Midwest most vulnerable to disruptions.
Valero Energy Corp., the third-largest U.S. fuel maker by market value, said processors would cut output if the tariffs hit oil imports. Canadian crude prices have been volatile in the weeks since the tariffs were first imposed, while premiums for gasoline and diesel have risen in recent days.
“The inclusion of Canadian oil in the 25% tariffs on Canada and Mexico will likely initially raise gasoline prices in the U.S. Midwest, and eventually weigh on crude prices globally (via weaker demand) and particularly in Canada where producers have limited export options,” Goldman Sachs analysts including Daan Struyven wrote in a note.
Crude is still set for modest gains in January, though gains fueled by U.S. sanctions on Russia and cold weather have been largely offset by Trump’s planned tariffs and his call for OPEC to lower crude prices by increasing production.
Traders expect the group to stick to its current supply policy — to gradually increase supply only starting in April — at a review meeting next week.
Trump had said earlier that he would make a decision on whether to exempt crude from the levies as early as Thursday night in the U.S., basing his decision on oil prices. “We don’t need the product they have,” he said. “We have all the oil you need.” Canada and Mexico have signaled they are ready to respond, raising the prospect of further escalation. In Canada, officials are drawing up a list of about $105 billion worth of U.S. products to target, according to people familiar with the plans. Prime Minister Justin Trudeau has also been exploring more drastic options, including export taxes on strategic commodities including oil. “The U.S. would be hit harder by a 25% tariff, and that goes against Trump’s plan to lower oil prices,” said Soni Kumari, a commodity strategist at ANZ Group Holdings Ltd. in Bengaluru. “We expect oil prices to trade in a tight range until the market gets some clarity.”
Source: Bloomberg
