Houston — Oil prices edged lower on Monday after rising more than $1 earlier in the session after the United States and Mexico announced a month-long pause on tariffs the U.S. had slapped on its southern neighbour.
U.S. President Donald Trump had imposed tariffs on Canada, Mexico and China to take effect from Tuesday, raising fears of supply disruption.
Brent crude futures were down 14 cents, or 0.2%, at $75.49 a barrel by 10:57 a.m. ET (1557 GMT), having earlier touched a peak of $77.34.
U.S. West Texas Intermediate crude futures were down 4 cents, or 0.01%, at $72.49 after climbing as much as 3.7% earlier in the session to reach their highest since Jan. 24 at $75.18.
U.S. President Donald Trump on Monday said he would pause tariffs planned for Mexico and that negotiations would continue to reach a “deal” between the two countries.
Mexican President Claudia Sheinbaum said U.S. and Mexico teams have started to work on Monday on security and business, adding that she proposed the pause in tariffs to Trump.
Trump’s sweeping tariffs on goods from Mexico, Canada and China had threatened to kick off a trade war that could dent global growth and reignite inflation.
The tariffs announced at the weekend included a 25% levy on most goods from Mexico and Canada, with a 10% tariff on energy imports from Canada and a 10% tariff on Chinese imports.
“Tariffs on Canadian energy imports would likely be more disruptive for domestic energy markets than those on Mexican imports and might even be counterproductive to one of the president’s key objectives – lowering energy costs,” Barclays analyst Amarpreet Singh said in a note.
Canada and Mexico are the top sources of U.S. crude imports, together accounting for about a quarter of the oil U.S. refiners process into fuels such as gasoline and heating oil, according to the U.S. Department of Energy.
Tariffs will raise costs for the heavier crude grades that U.S. refineries need for optimum production, industry sources said.
Gasoline pump prices in the U.S. are certainly expected to rise with the loss of crude for refineries and the loss of imported products, said Mukesh Sahdev at Rystad Energy.
Trump has already warned that the tariffs could cause “short-term” pain for Americans.
U.S. gasoline futures were 1.5% higher at $2.09 a gallon after touching their highest level since Jan. 16 at $2.169.
OPEC+ agreed to stick to its policy of gradually raising oil output from April on Monday and removed the U.S. government’s Energy Information Administration from the sources used to monitor its production and adherence to supply pacts.
Reporting by Florence Tan and Arunima Kumar Editing by David Goodman and Christina Fincher – Reuters
