Expectations for US Tariffs on Canada and Mexico | U.S. Finance Information
April WTI crude oil (CLJ25) Thursday closed up +1.73 (+2.52%), and April RBOB gasoline (RBJ25) closed up +0.0496 (+2.26%).
Crude oil and gasoline costs rallied Thursday after President Trump confirmed plans to impose tariffs on Canada and Mexico, the 2 prime suppliers of crude to the US, beginning March 4. Crude additionally has carryover assist from Wednesday, when weekly EIA crude inventories unexpectedly declined. Thursday’s rally within the greenback index to a 1-week high is a bearish issue for crude.
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President Trump confirmed Thursday that US tariffs on Canadian and Mexican items will start on March 4. The tariffs might spark a trade conflict between each nations, boosting US crude import costs. The US receives about 4 million bpd of crude from Canada and about 400,000 bpd from Mexico.
Oil costs are undercut after Iraq’s oil minister stated Wednesday that his nation had reached an settlement with Kurdistan to renew exporting crude through an oil pipeline by way of Turkey. Nevertheless, the ministry stated Iraq would stay within its OPEC manufacturing cap. These pipeline shipments of about 185,000 bpd have been shut down for the previous two years attributable to a cost dispute.
Oil costs proceed to be undercut by the thaw in US-Russian relations and doable peace talks on the Russia-Ukraine conflict, which may ultimately result in lowered sanctions on Russia and the total resumption of Russian oil exports.
Crude discovered assist final week on a drone assault on a Russian pumping station that would scale back Kazakhstan crude oil exports by 30%. Crude oil costs additionally discovered assist final Wednesday when Bloomberg reported that OPEC+ is contemplating a delay of month-to-month provide will increase which are at the moment attributable to begin in April.
In a supportive issue for crude oil costs, the US on January 10 imposed new sanctions on Russia’s oil industry that would curb world oil provides. The measures focused Gazprom Neft and Surgutneftgas, which exported about 970,000 bpd of Russian crude within the first 10 months of 2024, accounting for about 30% of its tanker stream, in keeping with Bloomberg information. The US additionally focused insurers and merchants linked to lots of of tanker cargoes. Weekly vessel-tracking information from Bloomberg confirmed Russian crude exports fell by -130,000 bpd to three.09 million bpd within the week to February 2. Russian oil manufacturing fell to eight.062 million bpd in January, which was -16,000 bpd under its OPEC+ quota.
Crude oil demand in China has weakened and is a bearish issue for oil costs. In response to Chinese language customs information, China’s 2024 crude imports fell -1.9% y/y to 553 MMT. China is the world’s largest crude importer.
A decline in crude oil held worldwide on tankers is bullish for oil costs. Vortexa reported Monday that crude oil saved on tankers which were stationary for a minimum of seven days fell by -12% w/w to 65.65 million bbl within the week ended February 21.
OPEC+ stated at its month-to-month assembly on February 3 that it will not change its oil-production plans within the first quarter however would regularly restore crude output in month-to-month phases starting in April. OPEC+ final month pushed back a deliberate hike of its crude manufacturing by +180,000 bpd from January to April and stated it will unwind its crude output cuts at a slower tempo than deliberate. OPEC+ had beforehand deliberate to revive 2.2 million bpd of output in month-to-month installments between January and late 2025. Nevertheless, the date for the finished manufacturing increase was pushed back till September 2026. OPEC Jan crude manufacturing fell -700,000 bpd to 27.03 million bpd.
Wednesday’s EIA report confirmed that (1) US crude oil inventories as of February 21 had been -4.3% under the seasonal 5-year average, (2) gasoline inventories had been -0.1% under the seasonal 5-year average, and (3) distillate inventories had been -7.8% under the 5-year seasonal average. US crude oil manufacturing within the week ending February 21 was unchanged w/w at 13.502 million bpd, modestly under the document high of 13.631 million bpd from the week of December 6.
Baker Hughes reported final Friday that energetic US oil rigs within the week ending February 21 rose by +7 to 488 rigs, reasonably above the 3-year low of 472 rigs posted January 24. The quantity of US oil rigs has fallen over the previous two years from the 4-1/2 yr high of 627 rigs posted in December 2022.
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