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Oil drops as Trump’s trade war stokes concern about crude demand

By Jacob Wendler and Mia Gindis

Published: 

Platform Ellen and Elly, an offshore oil and gas platform operated by Beta Operating Company LLC, off the coast of Long Beach, California, US, on Thursday, Nov. 2, 2023. Nearly two dozen oil and gas platforms off the southern California coast should be fully removed when they stop producing, according to an Interior Department plan that will shape the end of the regions more than half-century legacy with offshore drilling. Photographer: Tim Rue/Bloomberg (Tim Rue/Bloomberg)

Oil retreated after U.S. President Donald Trump ratcheted up his trade war with sweeping tariffs on major trading partners, raising concerns that economic turmoil will hurt crude demand.

West Texas Intermediate futures dropped to $70.73 a barrel at 4:59 p.m. New York time in late trading, down 1.4 per cent from their settlement price.

Trump fired off his biggest salvo yet against the global trading system, applying a minimum 10 per cent tariff on all exporters to the US, with higher rates on other trading partners, such as a 34 per cent tariff on US imports from China and 20 per cent on imports from the European Union. The move threatens to destabilize supply chains, stoke inflation and raise the cost of trillions of dollars in goods shipped annually to the US from other countries.

“Tariffs have a negative effect on the overall economy, and anything that has a negative effect on the overall economy is going to — all other things being equal — damage oil demand,” said Pavel Molchanov, an analyst at Raymond James.

Trump didn’t add new tariffs on Canada and Mexico, the US’s top two external sources of oil and key suppliers to refiners in the Midwest and Gulf Coast. Exemptions on goods covered by the North American trade agreement Trump brokered in his first term, including some oil, will remain in place.

US gasoline futures ended the session at the highest level since August, lifted by the approach of peak summer driving demand. Concerns about the tariffs sparking higher pump prices initially boosted futures as Trump started making his announcement, but the exemption for Canada and Mexico spurred futures to give up the post-settlement gains, traders said.

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--With assistance from Nathan Risser.

U.S. President Donald Trump’s reciprocal tariffs on trading partners are set to take effect today, a day he has proclaimed as “Liberation Day” for American trade. CTV News has extensive coverage across all platforms:

  • CTVNews.ca has in-depth coverage, real-time updates, and expert analysis on what the tariffs will mean for Canadians.
  • CP24.com has developments out of Queen’s Park and what the tariffs mean for the people of the GTHA.
  • BNNBloomberg.ca has what this means for the business community, investors, and the market.

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