Global crude prices edged lower on Monday, February 3, after rising more than $1 earlier in the session after the US and Mexico announced a month-long pause on tariffs the US had slapped on its southern neighbour. US President Donald Trump had imposed tariffs on Canada, Mexico and China to take effect from Tuesday, raising fears of a crude oil supply disruption in markets.
The Organisation of Petroleum Exporting Countries and its allies (OPEC+) agreed to stick to its policy of gradually raising oil output from April on Monday and removed the US government's Energy Information Administration (EIA) from the sources used to monitor its production and adherence to supply pacts.
The new trade tariffs imposed by US President Donald Trump on imports from Canada, Mexico, and China are likely to have a limited near-term impact on global oil and gas prices, investment bank Goldman Sachs said in a note.
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Brent crude futures were down 14 cents, or 0.2 per cent, at $75.49 per barrel, having earlier touched a peak of $77.34. US West Texas Intermediate crude futures were down four cents, or 0.01 per cent, at $72.49 after climbing as much as 3.7 per cent earlier in the session to reach their highest since January 24 at $75.18.
-US President Donald Trump said he would pause tariffs planned for Mexico and that negotiations would continue to reach a "deal" between the two countries. Mexican President Claudia Sheinbaum said US and Mexico teams have started to work on security and business, adding that she proposed the pause in tariffs to Trump.
-Trump's sweeping tariffs on goods from Mexico, Canada and China had threatened to kick off a trade war that could dent global growth and reignite inflation. The tariffs announced at the weekend included a 25 per cent levy on most goods from Mexico and Canada, with a 10 per cent tariff on energy imports from Canada and a 10 per cent tariff on Chinese imports.
-Barclays analyst Amarpreet Singh said in a note that tariffs on Canadian energy imports would likely be more disruptive for domestic energy markets than those on Mexican imports and might even be counterproductive to one of the president's key objectives - lowering energy costs.
-Canada and Mexico are the top sources of US crude imports, accounting for about a quarter of the oil US refiners process into fuels such as gasoline and heating oil, according to the US Department of Energy. Tariffs will raise costs for the heavier crude grades that US refineries need for optimum production.
-Analysts say gasoline pump prices in the US are certainly expected to rise with the loss of crude for refineries and the loss of imported products. Trump has warned that the tariffs could cause "short-term" pain for Americans. US gasoline futures were 1.5 per cent higher at $2.09 a gallon after touching their highest level since January 16 at $2.169.
Goldman Sachs said the potential tariff-driven decline in US natural gas imports from Canada is too small to significantly raise US natural gas prices. Oil and gas prices jumped on Monday after Trump imposed tariffs over the weekend.
"Canadian oil producers are expected to eventually bear most of the burden of the tariff with a $3 to $4 a barrel wider-than-normal discount on Canadian crude given limited alternative export markets, with US consumers of refined products bearing the remaining $2 to $3 a barrel burden," said the bank.
According to the Wall Street bank major, seaborne oil imports from Canada and Mexico will be rerouted to other markets, with the US replacing those supplies with crude from OPEC, Latin America, and refined products from Europe.
The investment bank has kept its 2025 and 2026 crude oil price forecasts unchanged, expecting minimal near-term price impact due to stable global oil production and demand, as well as the Canadian oil tariff already being priced in.
Last week, Goldman Sachs raised Brent oil price forecast for 2025 and 2026 to $78 (versus $76 previously) and $73 (from $71), respectively. Trump said he would talk with leaders of Canada and Mexico, which have announced retaliatory tariffs of their own, but downplayed expectations that they would change his mind.
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OPEC+ and Donald Trump clashed repeatedly during his first administration in 2016-2020 when the US President demanded it raise production to compensate for the drop in Iranian supply that resulted from US sanctions. Since returning to office in January, Trump has called the OPEC to bring down oil prices, saying elevated prices have helped Russia continue the war in Ukraine.
According to news agency Reuters, Russia's Deputy Prime Minister Alexander Novak said the group of ministers from OPEC discussed Trump's call to raise production, and agreed that the OPEC+ group will start boosting output from April 1 in line with previous plans.
The removal of EIA data was because the agency was not communicating on the information required and that the decision was not driven by politics. Monday's meeting coincided with a rise in oil prices after Trump imposed tariffs on Mexico, Canada and China, America's top trading partners.
Prices, however, have yet to return to the level of $83 a barrel hit on January 15 because of concern about the impact of US sanctions on Russia. OPEC+ is cutting output by 5.85 million barrels per day (bpd), equal to about 5.7 per cemt of global supply, agreed in a series of steps since 2022.
In December, OPEC+ extended its latest layer of cuts through the first quarter of 2025, pushing back a plan to begin raising output to April. The extension was the latest of several delays due to weak demand and rising supply outside the OPEC+ cartel.
Based on that plan, the unwinding of 2.2 million bpd of cuts - the most recent layer - and the start of an increase for the United Arab Emirates, begins in April with a monthly rise of 138,000 bpd. According to Reuters, the hikes will last until September 2026. Based on OPEC+'s previous practice, a final decision to go ahead with the April hike is expected around early March.
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