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Oil advanced as US President Donald Trump placed hefty tariffs on a range of imports, including crude from Canada and Mexico, threatening higher costs for American consumers.
US marker West Texas Intermediate (WTI) jumped as much as 3.7 per cent before paring about half of those gains to trade near $74 a barrel.
Global benchmark Brent was above $76. Trump followed through on his threats to impose levies of 25 per cent on Canadian and Mexican imports and 10 per cent on Chinese goods starting on Tuesday, spurring pledges of retaliation and leaving only a narrow window for last-minute negotiations.
10% levey on energy imports from Canada
Energy from Canada faces a reduced levy of 10 per cent, which includes roughly 4 million barrels a day of crude flows.
The US gets most of its oil imports from its northern neighbour — as well as about 500,000 barrels a day from Mexico.
The increased feedstock costs will likely translate to surging prices at the pump, with the most-active gasoline futures soaring as much as 6.2 per cent in New York.
Oil’s advance came despite a gauge of the dollar rising the most since November, making commodities priced in the currency more expensive for most buyers.
Trump said he would speak with Canadian Prime Minister Justin Trudeau on Monday, opening the prospect of a last-minute deal. The US president also pledged to “definitely” impose tariffs on the European Union, with the bloc saying it would respond firmly.
Crude oil price booster
Crude had fallen since Trump’s inauguration on Jan. 20, with the new administration’s policies threatening to disrupt global trade and growth.
Futures still notched a modest advance last month after gains due to a cold winter and US sanctions on Russian oil that have upended flows.
“Tariffs on the US’s largest crude oil supplier are providing a boost to crude oil prices and in particular refined product prices,” said Warren Patterson, head of commodities strategy for ING Groep NV. “While this may be supportive in the very short term, we may not need to wait too long for a risk-off move as it raises concerns over global growth.”
Higher trade volumes in Asia
The potential disruption to US oil supply saw the discount of WTI to Brent narrow to $3.31 a barrel from close to $4 early last month.
Traded volumes were far above average levels in Asian market on Monday, with about 200,000 lots of WTI across the curve trading in just the session’s first hour, almost a fifth of Friday’s aggregated total.
Meanwhile, a US envoy visited Venezuela on Friday and secured the release of prisoners in an improvement of relations that could have repercussions for supply from the OPEC+ member.
The producer group is expected to stick with its current policy when it meets later Monday.
