Oil Edged Higher After Trump Delays Mexico Tariffs
West Texas Intermediate (WTI) rose 0.9% to settle above $73 a barrel, paring an earlier gain of up to 3.7%, as Mexico's President Claudia Sheinbaum announced a one-month delay on tariffs following a conversation with President Donald Trump.
Trump also spoke with Canadian Prime Minister Justin Trudeau, raising the possibility of a last-minute agreement. He announced a 10% tariff on Canadian energy exports, lower than the previously announced 25%.
WTI futures initially jumped, reflecting higher demand for US oil to offset potential supply cuts from Canada, which exports approximately 4 million barrels per day to the US.
However, concerns over the trade war's impact on the global economy weighed on prices, leading WTI to briefly turn negative. The falling equities markets and a stronger dollar signaled investors' fears.
"Tariffs on the US's largest crude oil supplier are boosting prices," said Warren Patterson, commodities strategy head for ING Groep NV. "But the risk of slower global growth could lead to a sell-off soon."
The US also imports about 500,000 barrels of crude daily from Mexico, and the tariffs are expected to increase refining costs. Gasoline futures in New York surged up to 6.5%.
Fuel producers in the Midwest rely heavily on Canadian crude, and the tariffs will disrupt supplies at the Cushing, Oklahoma, storage hub that helps price US futures and the Gulf Coast, where Mexican supplies face a 25% levy.
Refiner Irving Oil Ltd. has already increased prices, reflecting higher costs.
Analysts note that the interdependent relationship between Canadian producers and Midwest refiners leaves producers more vulnerable to the tariffs.