Oil analysts and commentators fear that the tariff spat between Mexico and the US could spell big problems for the long-standing cross-border energy trade.
President Donald Trump has said he will impose tariffs on Mexican imports this month unless the country stops illegal migrants coming across the border into the US.
Notably, Mexico sends between 600,000 and 700,000 barrels of oil per day (bopd) into the US, mostly to refineries, which process it into gasoline and diesel. As a result, US consumers and refiners could be hit hard.
Meanwhile, Mexico buys more than 1 million b/d (barrels per day) of US crude and fuel, which is more than the US sells to any other country.
Concerns about retaliation
Analysts with investment bank Roth Capital Partners are concerned that "retaliatory tariffs from Mexico could disrupt" this crucial trade relationship.
The Roth note comes as oil prices steadied on Monday after hitting five month lows on Friday due to the worries over the potential US tariffs on Mexico. Prices stablized over indications from oil export giant Saudi Arabia that OPEC and other producers would continue to manage global supplies to avoid a surplus.
The US benchmark, namely West Texas Intermediate (WTI), is up 0.50% at US$53.77 on Monday, while Brent is near flat at US$61.87. Canadian crude is up around 4.6% at C$37.81 a barrel.
Canada and Mexico said Friday they would go ahead with plans to ratify a new continental trade pact despite the Trump-Mexico tariff threat. Canada sends 75% of its exports to the US, which includes oil, so it could be hit too with uncertainty in the North American petroleum trade.
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