US President Donald Trump's trade tariffs on Canadian and Mexican oil imports are likely to provide a short-term emotional boost to oil prices.
Duties on the two largest sources of US oil imports will increase costs for the heavier grades of oil US refineries need for optimum production. This will reduce their profitability and may lead to production cuts.
The tariffs are likely to force impacted crude producers to cut prices to find buyers. Asian refiners are well-prepared to absorb this discounted Mexican and Canadian crude, which could also support their profitability.
Expansion of the Trans Mountain (TMX) pipeline in Canada, which launched last May, means that the pipeline can now supply an additional 590 000 barrels per day to the Canadian Pacific coast. Increased TMX supplies to China could replace imports from Venezuela and Saudi Arabia.
According to the Energy Information Administration (EIA), Canadian and Mexican crude accounted for about 28% of oil consumed by US refineries in 2023, with refineries in the Midwest particularly dependent on Canadian crude. Tariffs and resulting higher prices may further limit the ability of US refineries to make profits.
From a technical point of view, Brent pushed back from the support level of $75 per barrel last week, and the nearest target is likely to be a test of the 79.6 level.
The overall recommendation is to buy Brent oil.
Profits should be taken at the level of 79.6. A Stop-loss could be set at the level of 72. The volume of the opened position should be set in such a way that the value of a possible loss, fixed with the help of a protective Stop loss order, is no more than 1% of your deposit funds.
This content is for informational purposes only and is not intended to be investing advice.
