Market news
03.02.2025, 13:57

Oil: Tariffs on Canadian energy imports – ING

US tariffs on imports from Canada, Mexico and China are set to come into effect on 4 February and failing to come to a deal would mean tariffs of 25% on Canadian and Mexican goods and 10% on imports from China. For Canadian energy, the Trump administration decided to impose a tariff of only 10%. However, this has still seen NYMEX RBOB and ULSD trading stronger in early morning trading today, which also dragged WTI higher, ING's commodity experts Ewa Manthey and Warren Patterson note.

USD to provide headwinds for broader commodities complex

Canada is a key supplier of crude oil to the US, with the US importing around 4m b/d from Canada (61% of total imports). This crude oil is a heavier crude, which many US refineries are configured to run on, particularly in the Mid-West. Given the importance of Canadian oil to the US, it is not surprising to see that WTI is trading stronger this morning. In theory, tariffs mean higher feedstock prices for US refiners (which will ultimately be passed onto consumers)."

"If Canada had a more sizeable export infrastructure allowing it to export to other external markets, Canadian oil producers would feel less pain from these tariffs. There is 890k b/d of pipeline capacity (Trans Mountain pipeline) from Alberta to the West Coast of Canada, allowing Canadian crude to be exported to other markets, and we are likely to see more of this pipeline capacity used once tariffs are imposed. Ultimately, given that Canadian producers have fewer alternatives than US refiners, means Canadian oil producers are likely to feel relatively more pain from these tariffs."

"More broadly, an escalation in trade tensions is not supportive for risk assets with it souring sentiment and raising concerns over the impact it could have on global growth, which means the strength in crude oil prices may be short-lived. The strength in the USD will also likely provide some headwinds not just for oil but the broader commodities complex."

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