Oil producers in Canada and Mexico will likely be forced to reduce prices and divert supply to Asia if US President-elect Donald Trump imposes 25 per cent import tariffs on crude imports from the two countries, traders and analysts said.
Two sources familiar with Trump’s plan told Reuters that oil would not be exempted from potential tariff hikes on imports from Canada and Mexico even as the US oil industry has warned the policy could hurt consumers, industry and national security.
The United States accounts for 61 per cent and 56 per cent of crude exports from Canada and Mexico, respectively, ship tracking data fromKpler showed.
Canadian crude exports have jumped 65 per cent to about 530,000 barrels per day (bpd) so far this year, the data showed, after the opening of the expanded Trans-Mountain pipeline increased shipments to US and Asia.
“The Canadian producers, if they face export constraints, if they’re not able to re-route their barrels that previously were exported to US to other markets, may face deeper discounts and may also suffer some revenue losses,” Daan Struyven, co-head of global commodities research at Goldman Sachs, told reporters on Wednesday.
Canada and Mexico export mainly heavy high-sulphur crude that is processed by complex refineries in the US and most of Asia.
“The impact is all on the heavy grades. What are the US refiners going to do? Even Saudi Arabian Heavy crude is limited,” a Singapore-based trader said, adding that some US refiners can only receive crude via pipelines, limiting their options for imports.
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