Oil climbed as US president Donald Trump reiterated plans to impose tariffs against Canada and Mexico from Saturday, although crude flows may be exempted from the levies.
Mr Trump said he would follow through on his threat to impose 25% tariffs on imports from the two countries, and also said he would target China. While the president flagged an imminent decision on whether crude would be included, no specific details had yet emerged.
Brent rose above $77 a barrel, while West Texas Intermediate was near $73.
Crude is still set for a modest advance in January, although gains from US sanctions on Russia and cold weather have largely been offset by Mr Trump’s planned tariffs and his calls on Opec to lower crude prices by increasing production. Traders expect the group to stick with its current supply policy – to gradually add supply only from April – at a review meeting next week.
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Canada ships about four million barrels a day to the US, and the two countries’ markets are closely integrated, with refiners in the midwest the most vulnerable to disruptions.
Mexico sends about 500,000 barrels a day to its northern neighbour. Valero Energy, the third-biggest US fuelmaker by market value, expects processors to cut production if tariffs hit oil imports.
“The inclusion of Canada oil in a 25 per cent tariff on Canada and Mexico would likely initially raise gasoline prices in the US midwest,” Goldman Sachs Group analysts including Daan Struyven said in a note. Eventually, such a move, would “weigh on crude prices globally”, they added.
Earlier, Mr Trump said that he would be making a determination on whether to exempt crude from the levies as soon as Thursday evening in the US, basing his decision upon the price of oil. “We don’t need the products that they have,” he said. “We have all the oil that you need.”
Canada and Mexico have signalled they are ready to respond, raising the prospect of an escalatory spiral. In Canada, officials drafted a roughly $105 billion list of US products to target, according to people familiar with the plans. Prime minister Justin Trudeau has also examined more drastic options, including export taxes on strategic commodities including oil.
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A broad swathe of the US oil industry is scheduled to report earnings on Friday, potentially offing executives an opportunity to comment on the outlook. Supermajors Exxon Mobil and Chevron are due to release figures, as is fuelmaker Phillips 66.
“The US will be more impacted from 25 per cent tariffs, and it goes against Trump’s plan to reduce oil prices,” said Soni Kumari, a commodity strategist at ANZ Group in Bengaluru. “We expect oil price to trade in a tight range until the market gets clarity.” – Bloomberg
