MW Oil, gasoline prices jump after Trump slaps tariffs on Canada crude

By William Watts

Oil futures were up sharply Monday after President Trump over the weekend slapped tariffs on Canada, Mexico and China, sparking worries over U.S. crude imports, though upside was limited by concerns a trade war would dent demand.

Traders will be watching a regularly scheduled meeting of ministers from members of OPEC+ - made up of the Organization of the Petroleum Exporting Countries and its allies - for any sign of a response.

Price moves

-- West Texas Intermediate crude CL00 for March delivery CL.1 CLH25 rose $1.77, or 2.4%, to $74.30 a barrel on the New York Mercantile Exchange.

-- April Brent crude BRN00 BRNJ25, the global benchmark, jumped $1.16, or 1.5%, to $76.83 a barrel on ICE Futures Europe.

-- Back on Nymex, March gasoline RBH25 jumped 4% to $2.141 a gallon, while March heating oil HOH25 gained 3.9% to $2.49 a gallon.

-- March natural gas NGH25 surged 8.8% to $3.313 per million British thermal units.

Market drivers

Oil futures surged, with WTI trading above $75 a barrel before trimming gains. Trump on Saturday announced tariffs, including levies of 25% on imports from Canada and Mexico, 10% on energy products from Canada and an additional 10% tariff on China.

The lower tariff on Canadian energy was seen as an effort to blunt the impact on U.S. energy consumers, though gasoline and heating oil futures still surged, dragging WTI higher, Warren Patterson and Ewa Manthey, commodity strategists at ING, said in a note.

Many U.S. refiners are heavily dependent on heavy crudes produced by Canada and Mexico. The U.S. imported 4.42 million barrels of oil per day from Canada in 2023, representing 52% of total U.S. oil imports, according to the Energy Information Administration. Mexico comes in at a distant second, representing 11% of U.S. oil imports at 910,000 barrels per day.

"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)," the ING strategists wrote.

They argued that the full cost of the tariff is unlikely to be picked up by US refiners and consumers, however. In 2023, 97% of Canadian oil exports went to the U.S. Given that Canada has very few alternatives for where to export its crude oil, the price of West Canada Select will fall, and its differential to WTI widen, they wrote.

At the same time, a global trade war is seen damping demand for crude.

Meanwhile, the meeting of OPEC+ ministers will also be in focus. Trump last month called on OPEC to boost oil production. OPEC+'s current plan is to unwind some of its production cuts beginning in April. Those measures, which had initially been set to take effect in the final quarter of last year, were repeatedly delayed amid oil-price weakness.

The tariffs also come amid concerns over China's demand outlook, with tariffs seen further weighing on the economy of the world's top crude importer.

"Thus, the signal is that tariffs will make it harder for OPEC+ to unwind cuts if they last longer and result in a significant demand dent," Mukesh Sahdev, global head of commodity markets - oil, at Rystad Energy, said in a note.

Read: Here's how much gas could cost you if Trump's threatened tariffs go through

-William Watts

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

February 03, 2025 07:30 ET (12:30 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.