By Florence Tan
SINGAPORE/LONDON- 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 percent 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, despite the US oil industry’s warnings that the policy could hurt consumers, industry and national security.
Canada and Mexico are the top two petroleum exporters to the United States, contributing 52 percent and 11 percent of its gross imports, respectively, data from the US Energy Information Administration showed.
The United States accounts for 61 percent of waterborne flows from Canada, and 56 percent from Mexico, ship tracking data from Kpler showed.
Canadian waterborne crude exports have jumped 65 percent to about 530,000 barrels per day (bpd) in 2024, the data showed, after the opening of the expanded Trans-Mountain pipeline increased shipments to the 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 said.
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.
“Either the producer or the refiner will have to absorb the tariffs,” he said, adding that Canadian producers will have to discount their oil more to attract demand from Asian refiners and cover long-distance shipping costs. – Reuters
