(Bloomberg) — Oil fluctuated as US President Donald Trump barreled toward imposing tariffs on Canada and Mexico, but kept traders guessing on whether crude will be exempted from the levies.
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West Texas Intermediate hovered below $73 a barrel after changing direction multiple times. Trump reiterated plans on Thursday to impose 25% levies on goods from the two US neighbors. While he flagged an imminent decision on whether crude would be included, no specific details have yet emerged.
The inclusion of crude would risk major reverberations across the oil market. Canada ships about 4 million barrels a day to the US, and the countries’ energy markets are closely integrated, with refiners in the Midwest the most vulnerable to disruptions.
Valero Energy Corp., the third-biggest US fuelmaker by market value, expects processors to cut production if tariffs hit oil imports. Canadian crude prices have been volatile in the weeks since the tariffs were first floated, while premiums for gasoline and diesel have risen in recent days.
“The inclusion of Canada oil in a 25% tariff on Canada and Mexico would likely initially raise gasoline prices in the US Midwest, and eventually weigh on crude prices globally (via weaker demand) and especially in Canada, where producers have limited export options,” Goldman Sachs Group Inc. analysts including Daan Struyven said in a note.
Crude is little changed in January after gains triggered by US sanctions on Russia and cold weather have been undercut by Trump’s planned tariffs and his calls on OPEC to lower crude prices by increasing production.
Traders expect the group to stick with its current plan to gradually add supply only from April at a review meeting next week.
Canada and Mexico have signaled they are ready to respond to tariffs, raising the prospect of an escalatory spiral. In Canada, officials drafted a roughly $105 billion list of US products to target, according to people familiar with the plans. Prime Minister Justin Trudeau has also examined more drastic options, including export taxes on strategic commodities including oil.
“The US will be more impacted from 25% tariffs, and it goes against Trump’s plan to reduce oil prices,” said Soni Kumari, a commodity strategist at ANZ Group Holdings Ltd. in Bengaluru. “We expect oil price to trade in a tight range until the market gets clarity.”
