Oil advanced as President Donald Trump placed hefty tariffs on a range of imports, including energy from Canada and Mexico, threatening higher costs for American consumers. US marker West Texas Intermediate (CL=F) jumped as much as 3.7% before paring about half of those gains to trade near $74 a barrel. It dramatically outpaced gains in the global Brent (BZ=F) benchmark, underscoring the risk to domestic US supplies, particularly at the storage hub of Cushing, Oklahoma, which helps price US crude futures.
Trump followed through on his threats to impose levies of 25% on Canadian and Mexican imports and 10% on Chinese goods starting on Tuesday, spurring pledges of retaliation and leaving only a narrow window for last-minute negotiations.
Energy from Canada faces a reduced levy of 10%, which includes roughly 4 million barrels a day of crude flows. Refiner Irving Oil Ltd., which operates the 320,000-barrel-a-day Saint John refinery in New Brunswick, has already begun putting up prices and said the majority of fuels from the plant are sold in the US.
Though much of the focus is on the large volume of crude and products that comes from America’s northern neighbor, the US also imports about 500,000 barrels a day of crude from Mexico. Reflecting expectations that refiners will face higher costs, gasoline futures soared as much as 6.2% in New York.
“Tariffs on the US’s largest crude oil supplier are providing a boost to crude oil prices and in particular refined product prices,” said Warren Patterson, head of commodities strategy for ING Groep NV. “While this may be supportive in the very short term, we may not need to wait too long for a risk-off move as it raises concerns over global growth.”
Oil’s advance came despite a gauge of the dollar rising the most since November, making commodities priced in the currency more expensive for most buyers, while equity markets also retreated. Trump said he would speak with Canadian Prime Minister Justin Trudeau on Monday, opening the prospect of a last-minute deal. The US president also pledged to “definitely” impose tariffs on the European Union, with the bloc saying it would respond firmly.
Crude had fallen since Trump’s inauguration on Jan. 20, with the new administration’s policies threatening to disrupt global trade and growth.
