ByIrina Slav– Feb 03, 2025, 2:20 AM CST
Crude oil prices began trade this week with a gain following President Trump’s announcement of 25% tariffs on most Canadian and all Mexican exports to the United States.
In mid-morning trade in Asia, Brent crude was changing hands for $76.16 per barrel and West Texas Intermediate was trading at $73.75 per barrel, both up after two consecutive weeks of losses.
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Canada was quick with its retaliatory move, saying it would slap in-kind tariffs on over $100 billion of U.S. imports, with a portion of these taking effect on Tuesday and the remainder in 21 days.
“Tariffs against Canada will put your jobs at risk, potentially shutting down American auto assembly plants and other manufacturing facilities,” Prime Minister Trudeau said at a press conference, as he addressed Americans. “They will raise costs for you, including food at the grocery store and gas at the pump.”
Trump has admitted U.S. consumers will feel a negative impact from the tariffs but said it was short-term pain in order to secure long-term gains. “We may have short term some little pain, and people understand that. But long term, the United States has been ripped off by virtually every country in the world,” the U.S. president said.
However, in the short term the tariffs will lead to disruption in refinery feedstock supply in the U.S., which is bullish for oil prices, energy analyst Saul Kavonic from Australia-based MST Marquee told Reuters.
ING’s Warren Patterson and Ewa Manthey, however, noted that the bullish effect would be limited. “Given the importance of Canadian oil to the US, it is not surprising to see that WTI is trading stronger this morning. In theory, tariffs mean higher feedstock prices for US refiners (which will ultimately be passed onto consumers),” they wrote, only to add that “However, the full cost of the tariff is unlikely to be picked up by US refiners/consumers. In 2023, 97% of Canadian oil exports went to the US and given that Canada has very few alternatives for where to export its crude oil, we are likely to see West Canada Select prices fall, which will see its differential to WTI widen.”
By Irina Slav for Oilprice.com
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