Oil Set for Weekly Decline as Trump Tariff Threat Looms Large

Summary

• Trump tariffs on Canada and Mexico could start this weekend
• Unclear if tariffs would exclude oil imports
• Russian sanctions dampen supply prospects
• OPEC+ to discuss U.S. output plans on Feb 3

(Reuters) – Oil prices were steady on Friday but on course for a weekly decline as markets wait to see if U.S. President Donald Trump follows through on his threat to impose tariffs on Mexico and Canada this weekend.

Brent crude futures for March, which expire on Friday, were up 1 cent at $76.88 a barrel by 1323 GMT. U.S. West Texas Intermediate crude (WTI) rose 24 cents to $72.97.

For the week, the Brent and WTI benchmarks were set for declines of 2.1% and 2.4% respectively.

Oil came under pressure from the potential negative economic impact of U.S. tariffs against Canada, Mexico and China, said PVM analyst Tamas Varga, adding that potential appreciation of the dollar as a result of tariffs also weighed on oil.

Trump has threatened to impose a 25% tariff as early as Saturday on Canadian and Mexican exports to the United States if those two countries do not end shipments of fentanyl across U.S. borders.

Canada and Mexico are the two largest crude oil exporters to the United States, but it is unclear if crude oil would be included among the tariffs. Trump said on Thursday that he would soon decide whether to exclude Canadian and Mexican oil imports from the tariffs.

Tariffs would be likely to result in large U.S. refinery run cuts, said Energy Aspects analyst Livia Gallarati.

“Our base case has been that, if tariffs are announced, they will include a grace period for negotiations and that oil is likely eventually to be carved out from any tariffs,” Gallarati added.

The market is also awaiting the OPEC+ meeting scheduled for Feb. 3.

Kazakhstan’s energy minister said on Wednesday that the group is set to discuss Trump’s plans to raise U.S. oil production and take a joint stance on the matter at next week’s OPEC+ meeting.

“OPEC will likely comply with the U.S. demand to increase production to avoid Trump’s ire. And they might announce a gradual unwinding of voluntary cuts, if not from April, then from the second half of the year,” Varga said.