Oil Prices Get Short-Lived Jolt From Latest Trump Tariff Threat

(Bloomberg) -- Oil futures got a short-lived jolt Thursday after President Donald Trump reiterated plans to impose 25% tariffs on imports from major crude suppliers Canada and Mexico.

West Texas Intermediate spiked as much as 1.5% from its settlement price after Trump made the comments to reporters at the White House. The gain just as quickly evaporated after he said he will decide later Thursday night on whether to include oil in the tariffs. WTI traded at $73.25 a barrel at 5:01 p.m. in New York.

“Traders remain cautious about fully pricing in crude tariffs due to their potential impact on the consumer,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. Trump’s follow-up comments “reinforced the market’s view that his administration is reluctant to see crude prices surge this early in his term.”

The levies, which the Trump administration has said may begin as early as Saturday, threaten to curtail imports of roughly 4 million barrels of Canadian oil a day. That could affect the sizeable portion of US refiners that are set up to process heavy, sour Canadian crudes.

Valero Energy Corp., the third-biggest US fuelmaker by market value, expects domestic production to shrink about 10% if the levies are placed on oil.

The administration’s conflicting signals on tariffs have whipsawed both US and Canadian oil prices in recent sessions. The discount on Canadian crude relative to US benchmark oil widened to a six-month low on the tariff threat earlier this week before recovering on Wednesday after Trump’s Commerce secretary nominee said the country could avoid the levies by strengthening its border.

The tariff whiplash has added to a bumpy start to the year for crude, which initially pushed higher as cold weather aided demand and the outgoing Biden administration rolled out a fresh package of sanctions against Russian flows. The early gains have since faded, with Trump pressuring OPEC to lower prices.

--With assistance from Christopher Charleston.