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Picture: 123RF/IGOR SHKVARA
Picture: 123RF/IGOR SHKVARA

New York/Singapore — Oil prices rose on Friday as markets weighed the threat of tariffs by US President Donald Trump on Mexico and Canada, the two largest crude exporters to the US, that could take effect this weekend.

Brent crude futures for March, which expires on Friday, gained 61c at $77.48 a barrel at 4.30am GMT. The more-active April contract was at $76.37 a barrel, up 48c.

US West Texas Intermediate crude (WTI) gained 65c to $73.38.

For the week, Brent is set to fall 1.3% while WTI has declined 1.69%.

However, for the month of January, Brent is set to gain 3.8%, its best month since June, and WTI is poised to climb 2.3%.

“Crude oil prices declined this week due to increasing fears surrounding Trump’s tariffs, which are expected to hinder global economic growth,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Investors were contemplating the likelihood of US tariffs alongside a flurry of executive orders and policy announcements, ANZ Bank analyst Daniel Hynes said.

Trump has threatened to impose a 25% tariff as early as Saturday on Canadian and Mexican exports to the US if those two countries do not end shipments of fentanyl across US borders.

It is unclear if the tariffs would include crude oil. On Thursday, Trump said he would soon decide whether to exclude Canadian and Mexican oil imports from the tariffs.

In 2023, the last full year of data, Canada exported 3.9-million barrels a day (bbl/day) of crude to the US, out of 6.5-million barrels a day of total imports, while Mexico exported 733,000bbl/day, according to the US Energy Information Administration, the statistical arm of the Department of Energy.

The increased risk of supply disruptions from the foreign policies of the new Trump administration had kept prices elevated, Hynes said.

“Sanctions on Russia, stopping purchases of Venezuelan oil and maximum pressure on Iran will increase the geopolitical risk premium on oil,” said Hynes.

“This could be compounded by the refilling of the strategic petroleum reserve, adding to oil demand,” he said.

The market would be watching the upcoming Opec+ meeting scheduled for February 3 as recent US sanctions on Russian oil had removed more than a million barrels from global supplies, possibly prompting the producer group to reconsider its output plans, Sachdeva said.

Kazakhstan’s energy minister said on Wednesday that the group was set to discuss Trump’s plans to raise US oil production and take a joint stance on the matter at next week’s meeting.

On the monetary front, the Federal Reserve’s decision to keep interest rates unchanged signalled a cautious approach moving forward amid inflation challenges in the world’s largest economy, Sachdeva added.

“With the threats of Trump’s tariffs, the path to disinflation is likely to become even more turbulent.”

Reuters

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