Oil prices fell on Tuesday after U.S. President Donald Trump agreed to postpone the imposition of large tariffs on Mexico and Canada, which are two of the largest suppliers of crude oil to the United States. Brent futures fell by 41 cents, or 0.5%, to $75.55 a barrel, while West Texas Intermediate (WTI) crude dropped by 75 cents, or 1%, trading at $72.41.
Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau announced that they agreed to enhance border security in response to Trump's demand to strengthen immigration measures and control against opioid trafficking. This would allow for a 30-day suspension of the introduction of a 25% tariff and also a 10% tariff on energy supplies from Canada, which were supposed to come into effect on Tuesday.
ING analysts noted that Canada remains vulnerable to trade wars until it expands its export capabilities beyond the U.S. by building additional pipelines from oil-producing regions to ports. "It will take several years to build this infrastructure, but it will provide Canadian producers with greater flexibility and potential to open new markets for sales," the research stated.
It is expected that Trump will talk to Chinese President Xi Jinping later this week, according to a White House announcement. The Trump administration plans to introduce a 10% tariff on all goods from China, which is set to go into effect later on Tuesday. Three Federal Reserve officials warned about the risks of inflation related to the plans of the administration to introduce tariffs, noting that the uncertainty in the price forecast requires more cautious interest rate cuts.
OPEC+ discussed on Monday the possibility of increasing production, but agreed to maintain the policy of gradual production increases for oil from April. On the supply side, investors will be expecting weekly data on U.S. oil reserves for the week ending January 31.
According to analysts' forecasts, crude oil inventories rose, while gasoline and distillate stocks likely decreased. Stockpile data will be presented by the American Petroleum Institute at 4:30 PM Eastern Time (21:30 GMT) on Tuesday and by the U.S. Energy Information Administration at 10:30 AM Eastern Time (15:30 GMT) on Wednesday.
