US Crude Outpaces Gains, Underscores Supply Risk from Tariffs
West Texas Intermediate (WTI) crude futures surged on Monday, outperforming Brent amidst President Trump's announcement of tariffs targeting Canada and Mexico, two major oil suppliers to the US. The spread between WTI and Brent narrowed to its smallest since September 2023, highlighting concerns about supply disruptions.
Short-Term Impact
Canadian oil prices are expected to weaken as producers seek to maintain flows to US refiners. Discounts on Western Canadian Select have reached their lowest level relative to US crude in Houston since July. Refiners are also likely to face higher operating costs, leading to potential spikes in fuel prices for consumers.
Midwest Concerns
The widening spread between front-month WTI and the following month's contract signals concerns about tight supplies in Oklahoma, where American crude futures are priced. JPMorgan estimates that 70% of US oil imports from Canada are processed in the Midwest.
Long-Term Uncertainties
Despite Monday's gains, crude prices remain below levels seen last month. Analysts anticipate potential impacts on global economic growth and last-minute efforts to halt the tariffs before they take effect on Tuesday. The implications of the tariffs for long-term oil demand and prices will continue to be monitored.