By Florence Tan, Siyi Liu and Robert Harvey
SINGAPORE/LONDON (Reuters) -Oil producers in Canada and Mexico are likely to be forced to cut prices and shift supply to Asia if newly-elected U.S. President Donald Trump imposes 25% tariffs on crude imports from the two countries, say traders and analysts.
Two sources familiar with Trump’s plan told Reuters that oil would not be exempt from possible tariff hikes on imports from Canada and Mexico, despite warnings from the U.S. oil industry that the policy could harm consumers, the industry and national security harm.
Canada and Mexico are the top two oil exporters to the United States, contributing 52% and 11% of gross imports respectively, U.S. Energy Information Administration data show.
The United States is responsible for 61% of water flows from Canada, and 56% from Mexico, according to Kpler shipping data.
Canada’s waterborne crude oil exports are set to rise 65% to about 530,000 barrels per day (bpd) in 2024, the data shows. Following the opening of the expanded Trans-Mountain pipeline, shipments to the US and Asia have increased.
“If Canadian producers face export restrictions, if they are unable to move their barrels previously exported to the U.S. to other markets, they could face larger discounts and also suffer some revenue losses,” he said. Daan Struyven, co. This was said by head of global commodities research at Goldman Sachs.
Canada and Mexico mainly export heavy, high-sulfur crude oil that is processed by complex refineries in the US and most of Asia.
“The impact is all about the heavy grades. What will the US refiners do? Even Saudi Arabian heavy crude is limited,” said a Singapore-based trader, adding that some US refineries can only receive crude through pipelines , limiting their options. for import.
“Either the producer or the refiner will have to absorb the tariffs,” he said, adding that Canadian producers will have to cut oil more to attract demand from Asian refiners and cover long-distance shipping costs.
Refining sources in Asia and analysts said they expect more Canadian and Mexican oil to flow to Asia if Trump imposes the tariffs.
“We will likely see quite a bit of volume going to China and India, where refinery configurations can refine the crude,” said LSEG analyst Anh Pham.
TMX exports to Asia have increased in recent months as Asian refiners led by Chinese processors test the new grades. However, Mexican exports have fallen 21% this year to about 860,000 barrels per day.
European refiners are less likely to turn to cheaper Mexican and Canadian cargo, Energy Aspects analyst Christopher Haines told Reuters.
Tariffs for Mexico “would potentially free up some crude for Spanish refineries that take Maya, but Asia could easily absorb all the volumes not sold to the US Gulf, so there will be competition,” he said, adding that European refineries typically do not import. a lot of Canadian crude oil.
Mexican crude oil exports to Europe have averaged about 191,000 barrels per day so far this year, with 81% of that delivered to Spain, according to Kpler. Canadian flows are lower, at 85,000 barrels per day.
Still, some traders and Goldman Sachs analysts remain skeptical that Trump would actually impose the tariffs, which he has previously used as a negotiating tool, because doing so would drive up inflation for U.S. consumers and refiners.
