HOUSTON (Reuters) - Oil prices edged up on Thursday, held in check by threatened U.S. tariffs on Canadian and Mexican crude imports set to take effect on February 1, 2025. Brent crude futures settled 29 cents, or 0.4%, higher at $76.87 a barrel. U.S. crude futures finished at $72.73 a barrel, up 11 cents, or 0.2%, higher than Wednesday.
"We're getting close to the deadline and people are getting nervous," noted Phil Flynn, senior analyst with Price Futures Group. President Donald Trump has threatened to impose a substantial 25% tariff on Canadian and Mexican exports if these nations do not take swift action to curb the illegal shipment of fentanyl to the United States.
Trump’s administration reaffirmed plans for the tariffs, which could deeply impact industries reliant on cross-border trade. His nominee to head the Commerce Department echoed similar sentiments, urging Canada and Mexico to act quickly.
Meanwhile, investors and market analysts have mentioned these tariffs as significant factors driving current oil prices. IG market analyst Tony Sycamore explained, "(this is) a major reason why crude oil is trading where it is."
Recent winter storms have also led to decreased demand, with crude inventories rising unexpectedly. U.S. refiners have curtailed production, leading to the largest build of stockpiles this year. Further complicity arises from the latest U.S. sanctions on Russia, squeezing exports from Russian ports.
Local officials have voiced their concerns over the impending tariffs. Brenda Locke, the Mayor of Surrey, B.C., stated, "The introduction of these tariffs threatens to disrupt vitalsupply chains impacting cities and communities across the country, and demands a Canada-first approach." Over 20% of businesses within her community maintain direct trade ties to the U.S., contributing roughly $2.8 billion annually to cross-border commerce.
Locke joined the Border Mayors Alliance, which comprises around 20 Canadian mayors advocating for the protection of border communities affected by these potential tariffs. "This partnership serves as a unified national voice to protect and advocate for communities, for cities and for neighborhoods," Locke emphasized during press conferences this week.
Drew Dilkens, Mayor of Windsor, Ontario, emphasized the interconnected nature of these border communities, declaring, "The alliance notes our two nations have never faced a circumstance so prominently threatening our shared economy and poses such devastating impacts on our country, on our cities, and, of course, on our families."
Locke voiced her expectation for support mechanisms for businesses adversely affected by these tariffs. She stated, "There’s no doubt about it. If 25 percent tariffs hit businesses in Surrey, there definitely would have to be some sort of relief. I don't know what the federal government is proposing totally, but some of this has to take place after Saturday."
Trump mentioned during announcements Thursday, "We are going to put tariffs on imports from Canada and Mexico," stirring anxiety across numerous sectors dependent on smooth trade relations. Observers are watching closely as the deadline approaches, noting the potential for significant economic repercussions across North America.
Experts predict these tariffs will not only affect the oil sector but may undermine broader economic stability, since local industries, from trucking to manufacturing, could also feel the adverse ripple effects. Industry stakeholders are urging collaboration and negotiation to avert the impending tariffs, which threaten to hurt both sides of the border.
With the situation slowly developing, the impact of this potential policy could define trade relations between the U.S. and its northern neighbors for years to come. The clock is ticking as officials scramble for solutions to prevent any disruptive measures from taking effect.