ByCharles Kennedy– Apr 09, 2025, 2:00 PM CDT
Reuters reports that U.S. refiners will refrain from making any substantial investments in expanding domestic crude processing or reducing reliance on Canada and Mexico, for instance, as the industry rallies around a war cry of frustration with the Trump administration over a global tariff war that threatens to strip demand and possibly spark a worldwide recession.
“We consider the adoption of the ‘reconciliatory tariffs’ will result in weaker global GDP growth and so lower oil demand growth, oil prices and weaker refining margins, as exemplified by the futures markets over recent days,” Alan Gelder, vice president of refining, chemicals and oil markets at Wood Mackenzie, said, as reported by Reuters.
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The Reuters report comes just minutes before the Trump administration announced it would pause tariffs for 90 days for everyone except China, leading to an instant bump in oil prices, with Brent crude trading up over 3% at 2:50 p.m. ET on Wednesday, and WTI trading up nearly 3.4%.
On Wednesday afternoon, Trump raised tariffs on China to 125% but paused reciprocal tariffs on others for 90 days.
Weaning U.S. refiners off Mexican and Canadian crude is easier said than done because the U.S. produces light shale crude, which requires complicated processing reconfigurations for refineries that typically process heavier Mexican and Canadian crude.
Last Friday, Reuters reported that shales of U.S. refiners plunged to a two-year low as fears of a global recession and hampered demand gained momentum amid a massive oil price plunge.
The oil price plunge has hit out at refinery margins, sparking fear across the industry segment.
Among America’s top refiners, Marathon Petroleum (NYSE:NPC) has lost nearly 6% in the past five days, while Valero Energy (NYSE:VLO) has lost nearly 9%. Phillips 66 (NYSE:PSX) has lost nearly 12% in the past five trading sessions. Combined, these top refiners, as of last Friday, had lost $20 billion in market capitalization since Trump’s April 2nd tariff announcement, based on LSEG data reported by Reuters.
Immediately following Trump’s tariff pause announcement,
The only shining light in the markets right now is what appears to be trader optimism surrounding the potential for a Federal Reserve rate cut as soon as May. According to Reuters, traders, as of Tuesday, put money on a 56% change of an interest rate cut in May, along with four additional rate cuts for 2025.
By Charles Kennedy for Oilprice.com
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