Trump's New Tariff Plan to Include Oil Imports
Donald Trump's plan to impose a 25% tariff on imports from Canada and Mexico will not exempt crude oil. According to sources familiar with the matter quoted by Reuters, this decision could have negative effects on both consumers and the U.S. oil industry. It is also noted that there are risks to national security.
Data from the U.S. Department of Energy indicate that Canada and Mexico are the two most significant sources of crude oil imports for the U.S. Oil imported from these countries constitutes about a quarter of the oil processed by U.S. refineries. Particularly, these refineries operate with equipment designed to process heavy crude from Canada and Mexico.
The oil industry is concerned The U.S. and Canadian oil industries had previously maintained an optimistic stance, anticipating that Trump's protectionist trade policies could reduce oil imports. However, the information that the plan would also encompass crude oil imports has led to unease within the sector. Major U.S. oil trading groups indicated that implementing these tariffs would be a mistake, illustrating a rare disagreement with the Trump administration.
Two sources informed about Trump's plans confirmed that crude oil would not benefit from the tariff exemption. This situation could complicate operational regulations for U.S. refineries and increase oil costs.
OPEC+ considers postponing production increase Meanwhile, discussions have emerged among OPEC+ countries to delay the increase in oil production. Following talks held in Baghdad between Iraq, Saudi Arabia, and Russia, two sources noted that the planned production increase set to begin in January could be postponed to a later date.
OPEC+, which consists of the Organization of the Petroleum Exporting Countries and allied nations led by Russia, controls approximately half of the world's oil supply. The group was planning to gradually unwind production cuts through small-scale increases in 2024 and 2025. However, the slowdown in the Chinese economy and increases in production from countries outside of OPEC+ are making the implementation of this plan more challenging.
Citi Research: "Production cuts may extend to 2025" Citi Research forecasts that OPEC+ members may continue production cuts longer than planned. According to the institution's assessment, the unwinding of production cuts could be extended by a quarter, potentially lasting until April 2025.
Citi Research experts indicated that uncertainties in global demand, along with increased activity from non-OPEC+ producers, would also influence the group's decisions. This could lead to a search for a new balance in oil price movements.