Oil prices surged on Monday following U.S. President Donald Trump’s decision to impose tariffs on imports from Canada, Mexico, and China. Investors are bracing for potential supply disruptions, though concerns remain over the economic impact of an escalating trade conflict. Brent crude and U.S. West Texas Intermediate crude saw notable gains, reflecting market jitters over impending changes in global trade dynamics.
Brent crude futures rose by 1.03% to $76.45 per barrel, reaching a session high of $77.34. U.S. West Texas Intermediate crude also climbed significantly, rising by 1.88% to $73.89 per barrel, having earlier touched $75.18, its highest price since late January.
Trump’s sweeping tariffs, which take effect on February 4, include a 25% levy on most goods from Mexico and Canada, alongside a 10% tariff on Canadian energy imports and Chinese goods. Analysts predict these measures could dent global economic growth while also fuelling inflationary pressures.
Barclays analyst Amarpreet Singh noted that the relatively softer stance on Canadian energy imports likely stems from strategic caution. He pointed out that harsher tariffs on Canadian crude could cause significant disruption to domestic energy markets, contradicting Trump’s objective of reducing energy costs.
Despite concerns over the broader economic impact, Goldman Sachs analysts expect the tariffs to have only a limited immediate effect on global oil and gas prices. However, the repercussions for the U.S. refining sector could be more pronounced. Canada and Mexico supply around a quarter of the crude that U.S. refiners convert into essential fuels like gasoline and heating oil. The added tariffs will increase costs for heavier crude grades, essential for optimal refinery operations.
The effect on U.S. gasoline prices is already evident. Futures climbed 2.5% to $2.11 per gallon, hitting a two-week high of $2.162. Rystad Energy’s Mukesh Sahdev anticipates further pump price increases due to the combination of refinery crude losses and reduced imported fuel supplies. Trump has acknowledged that these tariffs could lead to short-term economic pain for American consumers.
Ashley Kelty, an analyst at Panmure Liberum, emphasised that physical markets are expected to tighten in the short term, further supporting crude price gains. Meanwhile, investors are closely monitoring the OPEC+ meeting, where the group is expected to maintain its strategy of gradual production increases. If tariffs remain in place for an extended period, production losses in Canada and Mexico could create an opportunity for OPEC+ to adjust its supply strategy.
Key U.S. refiners with significant exposure to Canadian crude include HF Sinclair, Phillips 66, and Par Pacific. These companies could experience cost pressures as they navigate the shifting trade landscape. Market participants will be watching closely to see how these tariffs reshape global oil flows and impact energy costs in the months ahead.
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