TOKYPO/SINGAPORE: US crude prices fell by nearly 2 percent on Tuesday as US tariffs on China took effect, though President Donald Trump paused for a month a decision on steep levies on neighbors Canada and Mexico.

US West Texas Intermediate crude declined $1.32, or 1.8 percent, to trade at $71.84 per barrel, while Brent futures fell 87 cents, or 1.2 percent, to $75.09 by 9:17 a.m. Saudi time.

US tariffs of 10 percent on Chinese imports took effect at mid-day in Asian trade, spurring Beijing to retaliate with levies of 15 percent on US coal and liquefied natural gas and 10 percent on crude oil starting from Feb. 10.

“China’s counter-tariffs on the US may be perceived as a sign of escalation and may reduce the likelihood of a temporary resolution akin to US agreements with Mexico and Canada,” IG market strategist Yeap Jun Rong said in an email.

“As such, broader risk sentiments pare some optimism amid the changing dynamics, with oil prices extending losses further.”

He added, “Market participants are back to price for potential downside risks to global growth in the event of further tit-for-tat measures from both the United States and China.”

China’s 2024 crude oil imports from the US make up 1.7 percent of its total imports of crude, customs data show.

“WTI flows to China will be impacted, as a 10 percent tariff ... will render WTI delivered to China very expensive against other alternative crude like Kazakhstan’s CPC and Abu Dhabi’s Murban,” Sparta Commodities’ senior analyst June Goh told Reuters.

“However, in the big scheme of things, this should not impact the price of WTI significantly as WTI can still flow to other regions easily,” she added on messaging app WhatsApp.

Earlier, Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum said they had agreed to bolster border enforcement efforts in response to Trump’s demand to crack down on immigration and drug smuggling.

That would pause for 30 days tariffs of 25 percent, with a 10 percent tariff on energy imports from Canada, that had been set to take effect on Tuesday.

On the demand side, investors will be looking out for weekly US oil stockpile data for the week to Jan. 31. Analysts polled by Reuters expected that crude inventories rose, while gasoline and distillate inventories probably fell. 

LONDON: Oil prices rose on Monday after US President Donald Trump imposed tariffs on Canada, Mexico and China, raising fears of supply disruption, though gains were capped by concern over what could be an economically damaging trade war.

Brent crude futures rose $1.28, or 1.7 percent, to $76.95 a barrel by 3:32 p.m. Saudi time after touching a high of $77.34.

US West Texas Intermediate crude futures were up $1.89, or 2.6 percent, at $74.42 after touching their highest since Jan. 24 at $75.18.

Trump’s sweeping tariffs on goods from Mexico, Canada and China kicked off a trade war that could dent global growth and reignite inflation.

The tariffs, which will take effect on Feb. 4, include a 25 percent levy on most goods from Mexico and Canada, with a 10 percent tariff on energy imports from Canada and a 10 percent tariff on Chinese imports.

“The relatively soft stance on Canadian energy imports is likely rooted in caution,” Barclays analyst Amarpreet Singh said in a note.

“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.”

Goldman Sachs analysts expect the tariffs to have limited near-term impact on global oil and gas prices.

Canada and Mexico are the top sources of US crude imports, together accounting for about a quarter of the oil US refiners process into fuels such as gasoline and heating oil, according to the US Department of Energy.

The tariffs will raise costs for the heavier crude grades that US refineries need for optimum production, industry sources said.

Gasoline pump prices in the US 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.

US gasoline futures jumped 2.5 percent to $2.11 a gallon after touching the highest level since Jan. 16 at $2.162.

“It is clear that the tariffs will have a negative effect on the global economy, with physical markets set to get tighter in near term, pushing crude prices higher,” said Panmure Liberum analyst Ashley Kelty.

Investors will also be watching for news from an OPEC+ meeting on Monday, with expectations that the oil producer group will stick to its current plan of gradual increases to output.

Rystad’s Sahdev added that tariffs, if kept for long, have the potential to cause production losses in Canada and Mexico, which could help OPEC+ to unwind output curbs.