Oil Prices Rise As Trump Promises 25% Tariffs On Canada, Mexico Starting Saturday
Oil prices rose slightly on Friday morning as traders awaited clarity on whether the Trump administration will include oil imports in its plan to start imposing 25% tariffs on Canadian and Mexican oil imports on Feb. 1.
West Texas Intermediate crude for March delivery was last seen up 15 cents at $72.88 a barrel, while Brent crude for March was up 1 cent at $76.88.
Trump told reporters on Wednesday that he planned to impose tariffs on imports from U.S. neighbors on Saturday, but said no decision had been made on whether to include oil imports in the scheme. Canada is the largest supplier of oil imports to the United States, sending about 4.2 million barrels a day, 20% of U.S. consumption, to a U.S. refinery network that relies on its heavy crude. Mexico, the No. 2 exporter, sends about 500,000 barrels of crude a day to the U.S.
There is little consensus on whether the bulk of the tariff burden will fall on Canadian oil producers or U.S. refiners, but higher U.S. gasoline prices, particularly in the Midwest, are likely and could pressure the U.S. to remove the levies.
"There is a distinct possibility that, even if tariffs on Canadian crude imports were imposed, they would not last long — perhaps a few weeks at most. Why? Few in the energy industry want dislocation, the Trump administration does not want gasoline and diesel prices to rise, and Canadian officials would likely reach a deal with the president to give Trump the victory he clearly wants. Then, of course, there is the issue of potential retaliation," RBN Energy noted.
The tariff threat also comes ahead of an OPEC+ ministerial meeting on Monday, which is expected to continue to endorse a plan to begin rolling back 2.2 million barrels per day of voluntary production cuts in monthly increments of 122,000 barrels per day over 18 months starting in April. However, the potential for market disruption by Trump and his calls for higher OPEC supply to cut prices could persuade the group to reconsider the scheme. (AL)
Source: Bloomberg
