Oil prices jumped on Monday after U.S. President Donald Trump imposed tariffs on Canada, Mexico and China, raising fears of crude supply disruption from two of the biggest suppliers to the U.S., but the prospect of lower fuel demand capped gains.
U.S. West Texas Intermediate crude futures were at $73.97 a barrel, up $1.44, or 2%, by 0042 GMT, after hitting more than a week's high at $75.18 a barrel earlier in the session.
Brent crude futures rose 62 cents, or 0.8%, to $76.29 a barrel, after touching a high of $77.34.
Trump on Saturday ordered sweeping tariffs on goods from Mexico, Canada and China, kicking off a trade war that could dent global growth and reignite inflation.
Energy products from Canada will have only a 10% duty, but Mexican energy imports will be charged the full 25%, White House officials said.
"The relatively soft stance on Canadian energy imports is likely rooted in caution," Barclays analyst Amarpreet Singh said in a note.
"Tariffs on Canadian energy imports would likely be more disruptive for domestic energy markets than those on Mexican imports and might even be counterproductive to one of the president's key objectives - lowering energy costs."
Canada and Mexico are the top sources of U.S. crude imports, together accounting for about a quarter of the oil U.S. refiners process into fuels such as gasoline and heating oil, according to the U.S. Department of Energy.
U.S. gasoline futures jumped 2.6% to $2.1128 a gallon after hitting $2.162 earlier, the highest since Jan. 16.
The tariffs are bullish for near-term oil prices due to supply disruption risks, especially for heavier grades, said Saul Kavonic, an energy analyst at MST Marquee.
However, oil prices may fall beyond the next quarter as tariffs cause the demand outlook to deteriorate further and as OPEC+ has come under more pressure from Trump to unwind production cuts, he added.
The Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, is unlikely to alter existing plans to raise output gradually when it meets on Monday, delegates from the producer group told Reuters, despite the pressure from Trump.
(This story has been corrected to fix the U.S. gasoline futures to dollars, not cents, in paragraph 10)
