Power Up: Oil markets ready for Trump’s tariffs

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Feb 3 - By Liz Hampton

U.S. Energy Markets Editor

Hello Power Up readers! U.S. President Donald Trump's tariffs are dominating the headlines today in what is already a busy news cycle. The stock market is down on the news and oil prices have been bouncing between negative and positive territory. Both futures contracts were up in early trading on Monday, but fell after Trump delayed tariffs on Mexico by one month. Henry Hub natural gas futures were up about 8.5% to $3.302 per million British thermal units.

It's a busy day in the oil world, with everything from Trump readying tariffs on Canadian and Mexican energy products to an OPEC+ meeting.

Over the weekend, Trump said he would initiate tariffs on imports from Canada and Mexico on Tuesday. On Monday morning, he delayed tariffs on Mexico for one month after the country agreed to reinforce its northern border with 10,000 National Guard members.

The situation is very fluid - the start dates for tariffs have been a moving target and Trump only recently agreed to the carve-out for Canadian crude. For now, Canada, which supplies about 60% of U.S. crude imports, will get a 10% tariff while Mexico will see a 25% tariff.

The U.S. imports some 4 million barrels per day (bpd) of crude from Canada and about 457,000 bpd from Mexico. Some refiners have warned that the tariffs could hit their margins. Phillips 66, HF Sinclair and Par Pacific have higher exposure to Canadian crude, according to TD Cowen.

The tariffs are anticipated to raise the costs for heavier crude grades that many U.S. refiners are configured to run. That shift could create new opportunities for fuelmakers in other markets like Europe to make up the difference, Robert Harvey and Georgina McCartney report.

Meanwhile, Asian refiners could soak up discounted Mexican and Canadian crude, buoying their profit margins.

U.S. pump prices are likely to rise as a result of the tariffs, particularly if refiners have to pay more for their crude or if they opt to cut some production as margins fall.

The American Petroleum Institute on Saturday said it would continue to work with the Trump administration on full exclusions for energy products, emphasizing the importance of free and fair trade.

OPEC+, meanwhile, on Monday agreed to stick to its plans to gradually raise oil output from April. Trump, who clashed with OPEC during his first term, has called on the group to lower crude prices.

The group, which met online, also changed the list of consultants and other firms it uses to monitor production. It will no longer use the U.S. Energy Information Administration (EIA) or Rystad, and will instead use Kpler, OilX, and ESAI for second sources.

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Mexican billionaire Carlos Slim's Grupo Carso and state-energy company Pemex are looking at substantial changes to a deal to develop the country’s first deepwater natural gas field.

U.S. drillers added oil and gas rigs for the first time in eight weeks, oilfield services firm Baker Hughes said on Friday. The rig count, an oil indicator of production, rose by six to 582. It is down 37 rigs, or 6%, from last year's levels.

Oil and gas producer Infinity Natural Resources saw a valuation of $1.3 billion after its shares jumped 11% in its New York Stock Exchange debut on Friday. Oilfield services firm Flowco, which went public earlier this month, has seen its shares rise 20.7% from its offer price.

Colombian energy company Ecopetrol is renewing its oil joint venture with U.S. firm Occidental Petroleum in the Permian basin of Texas. The agreement had been thrown into question after Ecopetrol backed out of another deal in August to acquire $3.6 billion in other assets in the Permian from Occidental.

Pakistan has signed an agreement to defer by one year a $1.2 billion payment on the country's Saudi oil imports. The deal is with the Saudi Fund for Development.

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