Oil Dips as Trump's Tariffs, Energy Plans Jolt Market
Oil futures declined as traders weighed President Donald Trump's executive orders and pledges, including the threat of tariffs on Canada and ambitious plans to boost domestic energy production.
Brent slipped below $80 a barrel after oscillating earlier, while West Texas Intermediate hovered around $77. Trump signaled potential 25% tariffs on crude producers Canada and Mexico by next month and declared a national energy emergency.
However, Trump refrained from imposing China-specific measures initially, opting instead to instruct his administration to tackle unfair trade practices globally, according to Bloomberg.
"Initial relief over trade not being an immediate focus for Trump's 'Day One' was swiftly offset by the reports of 25% tariffs on Mexico and Canada," noted Yeap Jun Rong, market strategist at IG Asia Pte. "A potential surge in oil production under Trump's 'drill baby drill' mantra also remains a significant concern."
Crude has performed well this year due to increased heating demand in the Northern Hemisphere and broad US sanctions on Russia's oil industry, which disrupted global flows. Trump's Treasury secretary nominee has expressed support for increasing measures against Moscow, potentially exacerbating disruptions. Sanctions on Iran and Venezuela also loom.
The US imports approximately 4 million barrels of Canadian crude daily, and Goldman Sachs Group Inc. and the Canadian oil industry previously warned that tariffs would escalate gasoline and energy costs for US consumers.
Trump indicated plans to replenish the US strategic oil reserve and signed an order to withdraw from the Paris Climate Agreement. He lifted bans on offshore oil and gas leasing in most coastal waters.
Other initiatives include suspending the electric-vehicle mandate and reiterating a request for the European Union to increase its purchases of US oil and gas.
Meanwhile, Yemen's Houthis have suspended attacks on US and UK vessels in the Red Sea in compliance with the ceasefire agreement between Israel and Hamas, ending a year-long campaign that disrupted global trade.