DTN Oil Update

Oil Futures Rose Despite Tariffs on Canada, Mexico, China

HOUSTON (DTN) --â?¯Oil futures rose Monday morning after the Trump administration imposed tariffs on Canada, Mexico and China this weekend, and as market participants awaited OPEC's decision on its crude oil output strategy during its first meeting of the year.

The front-month NYMEX WTI futures contract rose by $2.14 to $74.67 barrel (bbl), and the April ICE Brent futures contract was $77.21 bbl, up by $1.54. The spread between both crude benchmarks narrowed to its lowest level in over two weeks. March RBOB futures contract rose by $0.1005 to $2.1593 gallon while, ULSD futures contract for March delivery gained $0.0941 to $2.4914 gallon.

On Feb. 1, the Trump administration imposed retaliatory trade tariffs on Canada, Mexico and China, claiming those countries have failed to halt illegal immigration and drug trafficking into U.S. territory.

"Until the crisis is alleviated, President Donald J. Trump is implementing a 25% additional tariff on imports from Canada and Mexico and a 10% additional tariff on imports from China. Energy resources from Canada will have a lower 10% tariff," according to a White House statement released this weekend.

Canadian energy resources include oil, natural gas, lease condensates, natural gas liquids, refined petroleum products, uranium, coal, biofuels, geothermal heat, the kinetic movement of flowing water, and critical minerals, according to the executive order that President Trump signed on Jan. 20 after declaring a national energy emergency.

Canada and Mexico are the main crude suppliers for U.S. refiners. In November, the United States imported nearly 4 million barrels per day (bpd) of Canadian crude and 453,000 bpd of Mexican grades, according to most recent data from the Energy Information Administration.

Despite concerns about the impact on refining margins of U.S. refiners, the oil futures market was bullish Monday morning.

This morning the U.S. Dollar Index rose by 0.94% to 109.155, reaching a two-week high.

The oil futures market also awaited the outcome of the first OPEC meeting of the year scheduled Monday. The oil cartel is expected to define its position against President Donald Trump's demand to lower global crude prices, after the president claimed two weeks ago that this could help end the war in Ukraine.

During its December meeting, OPEC agreed to extend production cuts of 1.65 million bpd until the end of March, and 2 million bpd until December 2026 due to weak demand from China and ample supplies. Market expectation is that OPEC will maintain an unchanged output plan.

However, if OPEC decides to alter its strategy, oil futures will be under pressure, amid weak global oil demand.

Maria Eugenia Garcia can be reached at Maria.Garcia@dtn.com