The latest tariffs imposed by US President Donald Trump on imports from Canada, Mexico, and China are expected to have a limited short-term impact on global oil and gas prices, according to a report by Goldman Sachs on Sunday.
Despite an initial market reaction that saw oil and gas prices jump on Monday, the investment bank stated that the overall impact of the tariffs on energy markets would remain modest.
Minimal effect on US natural gas prices
Goldman Sachs noted that a potential drop in US natural gas imports from Canada due to the new 10% tariff on Canadian energy imports would be too small to significantly affect US gas prices.
“Potential tariff-driven decline in US natural gas imports from Canada is too small to significantly raise US natural gas prices,” the bank stated in its report.
The tariffs, set to take effect on February 4, include a 25% levy on most imports from Mexico and Canada, alongside 10% tariffs on energy imports from Canada and goods from China.
Impact on Canadian oil prices
While the overall impact on the global oil market is expected to be muted, the report highlighted that Canadian oil producers are likely to bear the brunt of the tariffs.
- Canadian crude is expected to trade at a $3 to $4 per barrel wider-than-normal discount, as limited alternative export markets restrict its price.
- US consumers of refined oil products will bear the remaining $2 to $3 per barrel burden, suggesting some minor increases in fuel prices.
With few alternative buyers for Canadian crude, analysts predict that producers will struggle to offset losses caused by the tariffs.
Trade shifts in the global energy market
Goldman Sachs anticipates that the US will adjust its energy imports strategy in response to the new tariffs.
- Seaborne oil imports from Canada and Mexico are expected to be rerouted to alternative markets.
- The US will replace those supplies by increasing crude imports from OPEC countries, Latin America, and refined fuel imports from Europe.
Despite these shifts, global oil production and demand remain stable, leading Goldman Sachs to keep its long-term oil price forecasts unchanged.
Oil price forecasts remain steady
Goldman Sachs maintained its 2025 and 2026 oil price forecasts, citing market stability and the limited impact of the Canadian oil tariff.
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- Last week, the investment bank raised its Brent crude oil price forecast for 2024 and 2026 to $78 per barrel (previously $76) and $73 per barrel (previously $71), respectively.
- This suggests that while the market has reacted to Trump’s tariffs, analysts expect only modest fluctuations in oil prices over the coming years.
Trump unfazed by retaliatory tariffs
Both Canada and Mexico have announced retaliatory tariffs in response to Trump’s trade measures. However, the US president appears undeterred, stating that he will speak with Canadian and Mexican leaders, but downplayed expectations of reversing his decision.
“We’re protecting American jobs and industry, and we’ll see how they [Canada and Mexico] respond. But these tariffs are staying in place for now,” Trump said.
Meanwhile, Goldman Sachs analysts suggested that the US tariffs on Mexico and Canada would be short-lived, potentially being revised or removed in the future if economic pressures mount.
Market reaction and industry outlook
Following the announcement of the tariffs, oil and gas stocks showed some volatility, but energy analysts remain cautiously optimistic. The combination of global oil stability and ongoing trade adjustments is expected to keep energy price shocks under control.
With the situation still developing, global markets will closely watch how negotiations between the US, Canada, and Mexico unfold, and whether Trump’s trade policies will have longer-term consequences for the energy sector.
