Market Analysis

Image Credit: Reuters

Oil prices rose on Monday after U.S. President Donald Trump imposed tariffs on Canada, Mexico, and China, stoking concerns over potential disruptions to crude supply from two of the U.S.'s largest suppliers. However, the possibility of lower fuel demand limited the price increase.

U.S. West Texas Intermediate (WTI) crude futures climbed by $1.44, or 2%, to $73.97 a barrel, after briefly hitting $75.18 earlier. Brent crude also gained, rising 62 cents, or 0.8%, to $76.29 a barrel, after reaching a high of $77.34.

Trump's move on Saturday to impose extensive tariffs on goods from Mexico, Canada, and China has sparked a trade war, potentially impacting global growth and triggering inflation. Energy products from Canada will face a 10% tariff, while Mexican energy imports will be hit with the full 25% duty.

Barclays analyst Amarpreet Singh noted that the softer approach on Canadian energy imports is likely a cautious move, as tariffs on Canadian oil would disrupt U.S. domestic energy markets more than those on Mexican imports. The tariffs could hinder the president’s goal of lowering energy costs.

Canada and Mexico together provide about a quarter of the crude oil the U.S. refines into products like gasoline and heating oil. The new tariffs are expected to increase costs for the heavier crude grades U.S. refineries rely on, potentially lowering profitability and prompting production cuts.

U.S. gasoline futures rose by 2.6% to $2.1128 per gallon, after peaking at $2.162, the highest since mid-January.

The tariffs are likely to push oil prices higher in the short term due to concerns over supply disruptions, especially for heavier crude grades. However, analyst Saul Kavonic warned that prices could decline in the longer term if demand outlook worsens, and as Trump’s pressure on OPEC+ to reverse production cuts continues.

OPEC+ is not expected to change its plans to gradually increase output when it meets on Monday, despite the ongoing pressure from the U.S. president.

Paraphrasing text from "Reuters" all rights reserved by the original author.