Oil Markets on Edge Amidst Tariff Uncertainty
Market anxiety ahead of President Donald Trump's self-imposed February 1st tariff deadline centered on oil and gas Friday. Trump's comments on Thursday intimated potential issues with including energy staples in his plans, leaving unanswered questions about the impact on energy markets.
Canada, as the largest exporter of oil to the US, would face destabilization in oil flows if new tariffs were imposed. Despite earlier ambiguity, White House Press Secretary Karoline Leavitt confirmed the tariffs would go into effect "starting tomorrow" and denied any delays.
Trump's focus on oil follows recent remarks suggesting its potential inclusion in the tariffs. "It depends on what the price is," he stated, emphasizing a balancing act between this administration's tariff and energy policy priorities.
Expert Josh Zive of Bracewell energy law firm views Trump's comments as a sign that economic repercussions of a standoff with Canada are being recognized. The inclusion of oil would be significant, with Canada exporting over $160 billion worth in 2022, primarily to the US.
Oil markets reacted swiftly on Friday, with West Texas Intermediate falling below $72 a barrel amidst uncertainty. Canadian energy stocks also experienced volatility.
Despite Trump's claims of abundant domestic oil supply, experts disagree, citing potential destabilization for both the US and Canada in the event of a sudden oil disruption.
Hedgeye analyst Fernando Valle emphasized the need for Canadian heavy crude to balance lighter US oil in refineries. Tariff inclusion of oil "could be tremendously destabilizing to United States," noted Zive.
Analysts anticipate the exclusion of energy products from widespread tariffs due to the substantial energy trade between the nations and American voter sensitivity to gas prices.