(Bloomberg) — Oil edged higher after a volatile session as US President Donald Trump’s tariffs on Mexico were delayed by a month and investors assessed the levies’ potential to slow global economic growth, undercutting concerns about short-term supply constraints.
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West Texas Intermediate rose 0.9% to end the session above $73 a barrel, paring an earlier gain of as much as 3.7%, after Mexico President Claudia Sheinbaum said tariffs on her country would be pushed back by one month after a conversation with Trump on Monday.
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Trump also spoke with Canadian Prime Minister Justin Trudeau and said he’d talk with him again later on Monday, opening the prospect of a last-minute deal. Trump announced earlier that Canadian energy exports would be taxed at 10%, lower than the 25% tariffs previously announced.
WTI futures jumped earlier in the session, outpacing the gain in global benchmark Brent, reflecting potentially higher demand for US supplies to backfill any reduction in the 4 million barrels a day that flow to the US from Canada. The gains later faded — and WTI even briefly turned negative — as falling equities markets and a gain in the dollar signaled investors’ concerns that the trade war will hamper the global economy.
“Tariffs on the US’s largest crude oil supplier are providing a boost to crude oil prices and in particular refined product prices,” said Warren Patterson, head of commodities strategy for ING Groep NV. “While this may be supportive in the very short term, we may not need to wait too long for a risk-off move as it raises concerns over global growth.”
In addition to Canadian flows, the US also imports about 500,000 barrels of crude a day from Mexico. Reflecting expectations that refiners will face higher costs, gasoline futures soared as much as 6.5% in New York.
Crude has fallen since Trump, who has also pledged to “definitely” impose tariffs on the European Union, was inaugurated on Jan. 20, driven by the threat tariffs pose to growth and his calls for OPEC to lower prices. Despite Trump’s push, OPEC+ didn’t make any changes to its existing oil-production plans at a review meeting on Monday.