Canada, Mexico Tariffs Postponed, Oil Loses Potential Bullish Streak

But Trump's request to OPEC for cheaper oil falls on deaf ears: File Image/Pixabay

In moves completely predictable to political strategists, the U.S. tariffs against Mexico and Canada on Monday were paused when the leaders of those countries agreed to president Donald Trump's border security and other demands.

As a result, Brent for April rose a paltry 29 cents to settle at $75.96 per barrel, while West Texas Intermediate settled up 63 cents at $73.16.

Canadian prime minister Justin Trudeau and Mexican president Claudia Sheinbaum, whose countries are the biggest oil suppliers to the U.S., promised Trump they would beef up border enforcement in order to fulfill the brash billionaire's crackdown on immigration and drug smuggling.

The tariff pause also suspends the host of predictions about what the tariffs will do to oil and the economy, including BNP Paribas's earlier comment that "The new U.S. import tariffs on Canada and Mexico will be mildly bullish for WTI, in our view, as Midwest refiners will need more domestic light barrels to replace more expensive [Canadian and Mexican] blends."

Put on hold too, if only for the tariff pause's month-long duration, is Lipow Oil Associates president Andy Lipow's prediction that Trump's decision to impose a 10 percent levy on Canadian oil
"will raise gasoline and diesel prices about 15 cents per gallon; the extent to which the consumer is affected depends on where the consumer lives."

Also suspended is Goldman Sachs' view that Canadian oil producers will bear the brunt of the tariffs' burden with a $3 to $4 per barrel discount on Canadian crude, and that the levies will impact global GDP as well as oil demand, weighing down prices.

Kicked to the curb (for now) was the ultimate doomsday scenario, provided by Lipow, who worried that  "a cycle of tariffs and retaliatory actions by Canada, Mexico, China and perhaps others in the future could lead to a worldwide recession."

In other oil news on Monday, the Organization of the Petroleum Exporting Countries (OPEC) decided in a meeting not to change its plan to gradually unwind its production cuts from April – despite Trumps' earlier request that Saudi Arabia and the cartel bring down the cost of oil.