Oil Prices Surge Amid Trade Tensions
Oil prices experienced a notable increase on Monday following the announcement of new customs duties imposed by U.S. President Donald Trump on imports from Canada, Mexico, and China. This development has sparked concerns over potential disruptions to crude oil supplies from two of the United States’ largest suppliers. While fears regarding decreasing fuel demand loom, their potential impact on short-term gains appears limited.
As of 00:42 GMT, U.S. West Texas Intermediate (WTI) crude futures reached $73.97 per barrel, marking an increase of $1.44 or 2%. Earlier in the session, WTI prices had hit a high of $75.18, the highest level observed in over a week.
Brent crude futures also saw gains, climbing 62 cents or 0.8% to settle at $76.29 per barrel, after peaking at $77.34.
Implications of New Tariffs
The imposition of comprehensive customs duties on goods from Mexico, Canada, and China has raised fears of a trade war that could adversely impact global economic growth and inflation rates. Notably, White House officials indicated that energy products from Canada would face a customs duty of 10%, whereas imports from Mexico would incur a full 25% duty.
According to the U.S. Department of Energy, Canada and Mexico account for approximately a quarter of the crude oil processed by U.S. refineries, which include converting this oil into various fuel types such as gasoline and heating oil.
Industry sources suggest that these tariffs are expected to escalate the costs of heavy crude grades that U.S. refineries rely on for optimal production. Consequently, this could potentially diminish profitability and prompt a reduction in production levels.
Fuel Prices Rise
In the U.S., gasoline futures saw a significant uptick of 2.6%, climbing to $2.1128 per gallon. Earlier, prices reached $2.162, representing the highest levels since January 16.
Market analysts speculate that oil prices may experience a decline after the upcoming spring season due to the newly imposed tariffs potentially moderating demand expectations. Additionally, there could be increased pressure on OPEC+ from the Trump administration to reevaluate existing production cuts.
However, representatives from the Organization of Petroleum Exporting Countries (OPEC) and its allies, collectively referred to as OPEC+, have indicated that they are unlikely to alter their current strategy of gradually increasing production when they convene on Monday, despite external pressures.
The evolving dynamics in international trade and energy supply continue to shape the landscape of the global oil market, with implications for both domestic and international economic conditions.