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Picture: REUTERS
Picture: REUTERS

Tokyo/Singapore — Oil prices retreated on Tuesday as US President Donald Trump paused for a month a decision on steep tariffs on Mexico and Canada, the US’s biggest foreign oil suppliers, while prospects of higher Opec+ supplies from April also weighed.

Brent futures fell 50c, or 0.7%, to $75.46 a barrel by 4.32am GMT, while US West Texas Intermediate (WTI) crude declined 89c, or 1.2%, to trade at $72.27.

Both Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum said they had agreed to bolster border enforcement efforts in response to Trump’s demand to crack down on immigration and drug smuggling.

That would pause for 30 days tariffs of 25%, with a 10% tariff on energy imports from Canada, that had been set to take effect on Tuesday.

“The dominant theme for global markets has been all about US tariffs,” IG market strategist Yeap Jun Rong said in an email.

While the tariff delay for Mexico and Canada had given room for risk sentiment to improve and contributed to an unwinding in the dollar, oil prices had struggled to regain the upside, Yeap said.

“The prospect of higher oil supplies [Opec+] returning to markets from April could be a key overhang for prices ... especially with oil prices still at October 2024 levels.”

Oil cartel Opec and its allies, or Opec+, discussed on Monday a call by Trump to raise production, but agreed to stick to its policy of gradually raising oil output from April.

However, ING analysts warned that Canada would stay vulnerable to trade wars unless it expanded its export options beyond the US, with more pipelines from oilfields to ports.

“It would take several years to build this infrastructure, but it would provide Canadian producers more flexibility and the potential for more destinations for Canadian oil,” ING said.

Trump planned to speak with Chinese President Xi Jinping as soon as this week, the White House said, as a 10% duty on all China goods was set to take effect later on Tuesday.

On the demand side, investors will be looking out for weekly US oil stockpile data for the week to January 31. Analysts polled by Reuters expected that crude inventories rose, while petrol and distillate inventories probably fell.

US crude inventories were expected to be up 10.8-million barrels for the week ending January 31, while petrol inventory builds were likely at 500,000 barrels, said Macquarie energy strategist Walt Chancellor.

Reuters

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