Oil Rises on Trump Tariffs Threatening North American Energy Flow
New York, February 2025 - Oil prices surged in late trading as President Donald Trump announced plans to impose tariffs on imports, including crude oil. The move could disrupt supply chains in North America's integrated energy market.
West Texas Intermediate (WTI) crude climbed to $73.70 per barrel, a 1.6% increase from its previous settlement price. During an Oval Office address, Trump outlined tariffs on various imports, including steel, aluminum, oil, gas, pharmaceuticals, and semiconductors.
However, Trump indicated the possibility of reducing oil tariffs for Canada from 25% to 10%. The announcement adds uncertainty to a volatile day of oil trading, marked by fluctuating prices due to conflicting news regarding the timing and scope of the planned tariffs.
Following Trump's latest statement, Western Canadian Select heavy crude traded at a discount of $15.30 per barrel to WTI, wider than the pre-statement gap of $1. Earlier, WTI had declined on reports of potential delays and exemptions to the tariffs. However, futures losses diminished after the White House denied the reports and reaffirmed the February 1st implementation.
The inclusion of crude oil in the tariffs could have significant ramifications for the energy market. Canada exports approximately 4 million barrels of oil daily to the US, with their energy markets tightly intertwined. Refineries in the Midwest are particularly vulnerable to supply disruptions.
Valero Energy Corp., a leading US fuel producer, anticipates producers will reduce output if tariffs are imposed on oil imports. Canadian crude prices have experienced volatility since the tariffs were first proposed, while gasoline and diesel premiums have increased.
Goldman Sachs Group analysts, including Daan Struyven, predicted that a 25% tariff on Canadian and Mexican oil "would initially raise gasoline prices in the US Midwest and ultimately weigh on global crude prices (due to weaker demand) and Canadian prices in particular, where producers have limited export alternatives."