OIL: Trump Tariffs Threaten Global Oil Re-Routing

U.S. refiners could look towards Latin America and the Middle East to replace more costly Canadian and Mexican barrels impacted by Trump tariffs.

• Brazil and Guyana could offer alternative outlets for heavier barrels while also offering suitable proximity.
• The tariffs could spur a partial re-routing of energy supply chains that may result in longer travel times and increased transport costs.
• Excess Mexican crude would likely be marketed to Asia, while Canadian crude is expected to be discounted to clear into the US, while a limited amount could be exported via the Pacific coast.
• Canadian producers will be forced to “lower Western Canadian Select prices to offset the 10% tariff,” JPMorgan analysts said.
• US refiners, reliant on Canadian oil (mainly Midwest), will face higher feedstock costs due to the tariffs. The costs of the levies will translate to an extra $3 to $4/bbl borne by Canadian producers and $2 to $3 by Midwestern consumers, Goldman Sachs analysts said.
• Goldman Sachs believes that the new tariffs imposed by U.S. President Donald Trump on Canada, Mexico, and China are likely to have a limited short-term impact on global oil and gas prices.
• Referring to Canada  -   “At 10%, pricing offsets are more manageable, and likely will not require a significant overhaul to physical flows,” RBC