
Oil prices surged on Monday following U.S. President Donald Trump’s announcement of tariffs on oil imports from Canada, Mexico, and China, triggering worries over potential supply disruptions. However, concerns over the economic impact of a trade war limited further gains.
By 1232 GMT, Brent crude futures had climbed by $1.28 (1.7%) to $76.95 per barrel, after reaching a peak of $77.34. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures rose by $1.89 (2.6%) to $74.42, marking their highest point since January 24, at $75.18.
Trump’s broad tariff measures, which take effect on February 4, include a 25% levy on most goods from Mexico and Canada, as well as a 10% tax on energy imports from Canada and a 10% tariff on Chinese imports. These tariffs have sparked concerns that a trade war could slow global economic growth and stoke inflation.
Barclays analyst Amarpreet Singh noted that the softer stance on Canadian energy imports may reflect caution, as tariffs on these imports could disrupt domestic energy markets more than those on Mexican imports. He added that such tariffs might even undermine one of the president’s goals: lowering energy costs.
Goldman Sachs analysts expect that the tariffs will have a limited immediate effect on global oil and gas prices.
Canada and Mexico are key suppliers of crude to the U.S., together accounting for around 25% of the crude refined by U.S. refineries, according to the U.S. Department of Energy.
The new tariffs are expected to increase the cost of heavier crude, which U.S. refineries rely on for optimal production. Mukesh Sahdev of Rystad Energy warned that U.S. gasoline prices could rise due to both the reduced supply of crude and the loss of imported products.
Trump has already acknowledged that the tariffs could cause “short-term” pain for Americans.
In response, U.S. gasoline futures jumped by 2.5% to $2.11 a gallon, reaching their highest level since January 16 at $2.162.
Panmure Liberum analyst Ashley Kelty commented that the tariffs would likely strain global markets, leading to tighter physical oil supplies and driving prices higher in the short term.
Meanwhile, investors are keeping an eye on an OPEC+ meeting on Monday, where the oil cartel is expected to maintain its current plan of gradually increasing production. Rystad’s Sahdev suggested that prolonged tariffs could lead to production losses in Canada and Mexico, potentially aiding OPEC+ in unwinding its output curbs.