Canadian and Mexican oil producers may be forced to cut prices and shift shipments to Asia if US President-elect Donald Trump imposes a 25 percent import tariff on crude oil from those countries, according to traders and analysts. .
Two sources briefed Trump on the plan. Reuters Crude oil is unlikely to be exempt from potential tariff increases on Canadian and Mexican imports, despite warnings from the US oil industry about the negative impact on consumers, the industry and national security.
Canada and Mexico are the top two petroleum exporters to the United States, accounting for 52% and 11% of its total imports, respectively, according to data from the US Energy Information Administration.
Kpler ship tracking data show that 61% of the water flow from Canada and 56% from Mexico is in the US.
Canada’s waterborne crude exports are set to rise 65 percent to about 530,000 barrels per day (bpd) in 2024, data show, after the opening of the expanded Transmountain pipeline to the U.S. and Asia. I increased.
“Canadian producers, if they face export barriers, if they can’t reroute their barrels that were previously exported to the U.S. to other markets, they could face deep discounts and have to There could also be some loss in earnings,” said Don Struen, head of global commodities research at co-Goldman Sachs.
Canada and Mexico mainly export heavy high-sulfur crude oil that is processed through complex refineries in the US and much of Asia.
“This is having an impact on heavy grades. What are US refiners going to do? Even Saudi Arabia’s heavy crude is constrained,” said a Singapore-based trader, adding: It added that some US refiners could only get crude oil through pipelines, limiting their options. For imports
“Either the producer or the refiner will have to absorb the tariff,” he said, adding that Canadian producers would have to add more of their oil to attract demand from Asian refiners and cover long-distance shipping costs. An exception must be made.
Refining sources and analysts in Asia said they expect more Canadian and Mexican oil to flow to Asia if Trump imposes tariffs.
“We are likely to see a lot going to China and India, where the configuration of refiners is able to refine the crude,” said LSEG analyst Anah Pham.
TMX exports to Asia have increased in recent months as Asian refiners test new grades led by Chinese processors. However, Mexican exports are down 21 percent this year to about 860,000 bpd.
European refiners are less likely to jump on cheap Mexican and Canadian cargoes, said energy analyst Christopher Haynes. Reuters.
Tariffs on Mexico “will probably free up some crude for Spanish refiners that take the Maya, but Asia can easily absorb any volume that isn’t sold in the US Gulf, so there’s competition.” “There will be,” he said, adding that European refiners typically don’t import. Too much Canadian raw.
Mexico’s crude oil exports to Europe have averaged 191,000 bpd so far this year, with 81% going to Spain, according to Kpler. Canadian flows are lower at 85,000 bpd.
Still, some traders and Goldman Sachs analysts doubt Trump will actually implement the tariffs, which he has previously used as a negotiating tool, because doing so would raise inflation for U.S. consumers and refiners.