Key Points
- Oil prices rise as Trump lowers Canadian crude tariffs.
- Analysts warn tariffs may disrupt supply and increase fuel costs.
- OPEC+ is expected to maintain production despite market concerns.
Following U.S. President Donald Trump’s announcement on Friday that he intends to cut proposed tariffs on Canadian oil from 25% to 10% and postpone levying taxes on oil and gas until February 18, later than first anticipated, oil prices surged in extended trade.
Trump’s tariff decision pushes oil prices higher
Following closing down 20 cents, or 0.3%, at $72.53, U.S. West Texas Intermediate (WTI) crude rose 73 cents, or 1%, to $73.48 a barrel in aftermarket trading.
After steadying down 22 cents, Brent crude futures for April climbed 54 cents, or 0.7%, to $76.54 a barrel in extended trading. Closed at $76.76 a barrel, the March contract expired Friday down 11 cents.
According to Reuters, both benchmarks slumped for the second straight week; Brent lost 2.1% while WTI lost 2.9%. Analysts claim the fall was caused in part by worries about tariffs raising gasoline prices and hence lowering world energy consumption.
Regarding if the tariffs would apply to Canadian crude, Trump answered: “I’m probably going to slightly lower the tariff on that. We believe we will bring it down for the oil to be 10%.
Previously threatening a 25% tariff on Canadian and Mexican exports to the United States beginning February 1, Trump has not specified whether oil and gas would be included.
Proposed tariffs might set off retaliatory actions from Canada and Mexico, further aggravating trade conflicts, analysts say.
The two biggest crude oil sources to the United States are Mexico and Canada. Midwest refineries especially depend on Canadian crude, hence supply interruptions could raise gasoline prices.
Energy Aspects analyst Livia Gallarati stated, “tariffs would probably result in significant U.S. refinery run cuts.”
Analysts warn of supply disruptions and higher fuel prices
Warning citizens of possible economic difficulties ahead, Canadian Prime Minister Justin Trudeau warned Friday that Canada would react “immediately and forcefully” should the U.S. apply tariffs.
The market is waiting for an OPEC+ conference on Monday, when the organization is supposed to follow its present strategy for progressively raising production.
Despite Trump’s requests for Saudi Arabia to assist in lowering prices, sources told Reuters OPEC+ is unlikely to change output levels.
Baker Hughes reported in other market news that the U.S. oil rig count, a gauge of future output, increased by seven to 449 this week.
Furthermore disclosed Friday by the U.S. Commodity Futures Trading Commission (CFTC) are hedge funds and money managers **cutting their net long U.S. crude futures and options positions** in the week ending Jan. 28.
