Oil prices saw a modest increase on Thursday, bolstered by growing concerns over potential tariffs on Canadian and Mexican crude imports imposed by the United States, which could take effect as early as this weekend.
Brent crude futures advanced by 29 cents, or 0.4%, reaching $76.87 a barrel, while US crude futures gained 11 cents, or 0.2%, to $72.73 a barrel.
This price hike comes after US President Donald Trump threatened to impose a 25% tariff on crude exports from Canada and Mexico if the two countries fail to halt fentanyl shipments across the US border. The White House confirmed the tariff plan on Tuesday, and the President’s nominee for Commerce Secretary stated on Wednesday that the countries could avoid the tariff if they act swiftly to secure their borders against fentanyl trafficking.
Analysts suggest that traders have already priced in the potential tariffs, contributing to the price surge.
Meanwhile, on the supply side, new US sanctions on Russia are further tightening global oil supply. These sanctions are expected to reduce Russian crude oil exports from its western ports by 8% in February compared to the January plan, as Russia shifts focus to refining operations.
The market is also preparing for the upcoming meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, known as OPEC+, scheduled for Monday, February 3. Russia, in line with OPEC+ agreements, has been reducing its oil supply to address market oversupply. However, Kazakhstan, Iraq, and Russia are still working to compensate for previous non-compliance with OPEC+ quotas.
The government of Kazakhstan revealed that OPEC+ will discuss President Trump’s efforts to ramp up US oil production and could adopt a collective stance on the issue. Trump has repeatedly urged OPEC and its leading member, Saudi Arabia, to lower oil prices, claiming this move could help resolve the ongoing conflict in Ukraine. Additionally, Trump is pushing for the US to maximize its oil and gas production, with the nation already holding the position of the world’s largest producer at record-high levels.
Despite the rhetoric, analysts believe a full-blown price war between the US and OPEC+ is unlikely, as it could negatively impact both sides.
