Analysis-Trump’s oil tariffs a boost for European and Asian refiners

By Robert Harvey and Georgina McCartney

London / Houston (Reuters) – The trade rates of US President Donald Trump on Canadian and Mexican oil imports will offer European and Asian refineries a competitive advantage against their American rivals, analysts and market players in Reuters.

Trump ordered on Saturday 25% prices on Canadian and Mexican imports and 10% on goods from China from Tuesday to contact a national emergency on fentanyl and illegal foreigners entering the United States, have declared managers of the White House. Canada’s energy products will only have 10%rights, but Mexican energy imports will be billed in total of 25%, they said.

The prices on the two largest sources of American raw imports will increase costs for the heavier notes of American refineries for optimal production, said industry sources, reducing their profitability and potentially forcing production reductions.

This offers refiners on other markets the opportunity to catch up with the difference. The United States is currently a diesel and petrol importer exporter.

“Less American diesel exports would support European margins, while more export possibilities can remain on the highly pressure petrol market,” said the chief economist Vortexa, David Wech.

“So, overall, a positive for European refiners, but probably not for European consumers,” he added.

“European margins can improve because the American northeast will have to import more petrol,” said a frame of a brokerage house. “I think that European and Asian refiners are the big winners.”

The prices would also likely have had an impact on crude price sellers to find buyers, said Matias Togni, founder of the analysis company Next Barrel. Asian refiners are ready to soak up this reduced Mexican and Canadian crude, which could also cause their beneficiary margins, he said.

Asian refiners could obtain the competitive advantage because they have the equipment to make heavy gross and are also increasing their execution rates, said Randy Hurburun, responsible for refining to energy aspects.

The expansion of the Trans Mountain (TMX) pipeline in Canada, which was launched last May, means that pipeline can now ship 590,000 additional barrels per day on the Canadian Coast of the Pacific.

Higher TMX expeditions to China could replace imports from Venezuela and Saudi Arabia, trade sources said.

Refiners in Asia-Pacific could also exploit fuel arbitration opportunities in the American West Coast, which could be hit by higher raw material costs incurred in the gross supply from further away, added WEC Vortexa.

Admittedly, there are expectations that the Midwest refiners will continue to buy the Canadian crude, even with the price, and could simply transmit costs to their pump customers.

“Midwest people may look forward to spending 20 or 25 cents Gallon 20 or 25 cents,” said Stewart Glickman, actions research analyst at CFRA Research.

Raw material

Canadian and Mexican crude represented around 28% of the gross regime of American refiners in 2023, data from the energy administration (EIA) showed, with interior refineries in the Midwest, in particular dependent Canadian barrels.

The ability of American refiners to manage a more abundant light gross supply instead of Canadian and Mexican oil will be limited due to their different qualities, analysts said.

“More use of WTI in domestic refiners is probably limited, they really need residual fuels,” said Neil Crosby, analyst of the goods of Sparta.

Although some American refineries have completed upgrades to treat more light gross, this would lead to a secondary units, weighing on the economy and efficiency, said Hurburun of Energy Aspects.

“When you put friction in the system, and in particular around the optimization of the crude for a refiner, will probably offer you higher costs accordingly,” said the world sector of Deloitte for oil, gas, gas And chemicals said John England.

Canadian US imports have reached their highest recorded from the week until January 3, according to EIA, a potential sign of refiners approaching prices. Imports have slipped slightly since 3.72 million b / d last January 24, but remain raised over the year according to EIA.

Meanwhile, American refiners have already seen the benefits slide from record levels in 2022. Oil Major Chevron, for example, reported the benefits of the fourth quarter below the estimates of Wall Street, after low margins have trained A refining case in a loss for the first time since 2020.

The prices and subsequently higher prices could still encroach on the ability of American refiners to achieve a solid profit.

“The mechanics of the price on Mexico and Canada is very difficult for the competitiveness of the American system,” added Crosby de Sparta.

(Report by Robert Harvey in London, Georgina McCartney in Houston, Shariq Khan, Nicole Jao and Jarrett Renshaw in New York and Trixie Yap in Singapore, edition by Alex Lawler and Nia Williams)