The US could be forced to look for alternative sources of crude oil and face difficulties in running their refineries due to possible tariffs on Canadian or Mexican crude oil. This would limit the options available to them.
Rohit Rathod, Vortexa’s senior analyst for oil markets, said that although the proposed tariffs against Mexican and Canadian imports were delayed to early March, market uncertainty remains due to Donald Trump’s plan.
Rathod, in an analysis, said that tariffs could lead to a drop in the run rate of US Midwest refiners who depend primarily on Canadian crude through pipelines.
Existing uncertainty has been exacerbated by the recently announced 25% tariffs on steel and aluminium, starting March 12.
Rathod also said that tariffs on Mexican crude could prevent several US Gulf Coast refiners obtaining heavy grades of crude oil, which are difficult to replace.
What is at stake?
According to Vortexa, the importation of crude oil to the US from Canada averaged 4 million barrels a day between January and November 2024.
Rathod stated that the majority, or 3.7 million barrels per day, are transported by pipelines and railways, while the rest is shipped via sea.
Data from Vortexa for the period October to December 2024 shows that around 170,000 barrels of Canadian crude oil per day are transported by water between Vancouver and the US West Coast.
The TMX pipe was used to transport these barrels. If tariffs are imposed on them, they could then be redirected towards Northeast Asia.
Around 200,000 barrels of crude oil per day from the East Coast Canada may also be affected.
According to the analysis, 250,000 barrels of clean products imported into US PADD 1/Atlantic Coast by EC Canada each day would also need to be redirected.
If tariffs are imposed, Gulf Coast refiners may be forced to scramble in order to replace the 450,000 barrels of crude oil imported from Mexico per day. This is the second largest flow. Gulf Coast refiners may struggle to meet this demand if tariffs are implemented.
Rathod added that the US imports 100kbd (or a little more than 100 kbd) of residual fuel from Mexico, and 50kbd (or a bit less) from EC Canada.
There are also small quantities of clean products imported from China, around 40kbd. These could be affected.
Tariffs on China in force
China responded with counter-tariffs to US tariffs imposed on Chinese energy imports including LNG, thermal/coking coal, crude oil and other US imports.
Tariffs on Chinese goods went into effect February 10, 2019.
The retaliatory tariffs against US energy imports are 10% and 15% respectively. However, we believe that there will be little impact on China given the fact that US-origin cargoes could be easily diverted to destinations elsewhere in Asia.
Tariffs on imports of LPG and ethane, the primary trade in energy between China and US, are not applicable to China.
As of February 12th, Vortexa reports that four shipments of US oil are expected to arrive in China from mid-February until the end of march.
We understand that the buyers are likely to look for swaps between buyers from neighboring countries, since tariff exemptions appear unlikely. Rathod pointed out that the barrels can be placed in tanks for storage until they are ready to deliver.
It’s important to remember that US LPG and ethane exports haven’t been hit by tariffs in China, even though recent tariffs on other products were imposed.
Chinese PDH and steam crackers are operating with low margins. Tariffs imposed by China on US imports would have a negative impact.
Rathod stated, “We have a few uncertain weeks in front of us. It is hard to make any comments with absolute certainty.”
Trump will announce next week that he’s considering imposing reciprocal tariffs against imports coming from the European Union.
Tariffs against the European Union may trigger retaliatory duties. EU leaders will hold their own discussions to determine the level of retaliation. These developments only increase the level of uncertainty surrounding US energy flow.
As new information becomes available, this post US refiners prepare for disruptions as Tariffs Threaten Canadian and Mexican Crude Supply may be updated.
