Oil prices rose on Friday as markets reacted to US President Donald Trump’s threat to impose tariffs on Canada and Mexico, the two largest suppliers of crude oil to the United States.

 

These tariffs, if implemented, could take effect as early as next week.

 

Brent crude futures for March, which expire today, increased by 38 cents to USD 77.25 per barrel. Meanwhile, the more actively traded April contract rose by 34 cents to USD 76.23 per barrel.

 

US West Texas Intermediate (WTI) crude also climbed by 49 cents, reaching USD 73.22 per barrel, according to Reuters data.

 

For the week, Brent is expected to decline by 1.6 percent, while US crude is set to drop by 2 percent. However, Brent is on track to gain 3.6 percent in January, marking its best monthly performance since June, while US crude is expected to rise by 2 percent.

 

Potential tariffs and their market impact

 

Trump has threatened to impose a 25 percent tariff on imports from Canada and Mexico starting Saturday unless both countries take steps to curb fentanyl traffickers across the US border.

 

It remains unclear whether crude oil will be subject to these tariffs. Trump has indicated that a decision on whether to exempt Canadian and Mexican oil will be made soon.

 

Daniel Hynes, an analyst at ANZ Bank in Australia, commented: “Oil prices have been volatile as investors weigh the potential impact of US tariffs, along with a series of executive orders.”

 

US oil imports and the effects of new policies

 

According to the US Energy Information Administration (EIA), Canada supplied 3.9 million barrels per day of crude oil to the U.S. in 2023, accounting for the majority of the 6.5 million barrels per day in total US oil imports. Mexico contributed an additional 733,000 barrels per day.

 

Hynes warned that geopolitical risks from Trump’s new policies could further increase oil prices. He explained that sanctions on Russia, restrictions on Venezuelan oil purchases, and heightened pressure on Iran would increase the geopolitical risk premium on crude.

 

Additionally, he cautioned that efforts to refill the US Strategic Petroleum Reserve could boost demand for crude oil, adding further upward pressure on prices.