Oil Prices Steady Amid Tariff Uncertainty and AI Demand Concerns

TOKYO (Reuters) – Oil prices held steady on Wednesday as investors assessed the potential impact of U.S. tariffs on Canadian and Mexican imports, while largely ignoring an increase in U.S. weekly crude inventory. Brent crude futures dipped slightly by 2 cents to $77.47 a barrel by 0132 GMT, while U.S. crude futures rose by 4 cents, or 0.1%, to $73.81 a barrel.

The oil market experienced early-week declines, reaching multi-week lows, driven by surging interest in Chinese startup DeepSeek’s low-cost artificial intelligence (AI) model. This development raised concerns about energy demand for data centers, affecting the broader energy sector. Additionally, weak economic data from China further dampened the demand outlook.

The White House announced that U.S. President Donald Trump plans to issue 25% tariffs on Canada and Mexico on Saturday, while considering additional tariffs on China. Although Trump did not immediately impose tariffs on Monday as previously promised, he mentioned contemplating 25% duties on imports from Canada and Mexico on February 1 due to illegal immigration and fentanyl crossing into the U.S. The potential impact of these tariffs on U.S. oil imports from these countries remains uncertain.

Canada supplied approximately 3.9 million barrels per day of oil to the U.S. in 2023, accounting for roughly half of the year’s total imports, while Mexico supplied 733,000 barrels per day, according to the Energy Information Administration (EIA).

“Investors are trying to assess the impact of Trump’s tariff policy,” said Yuki Takashima, an economist at Nomura Securities. “If tariffs are imposed, the U.S. energy market could face immediate disruptions, but also experience falling demand later due to higher energy prices and declining consumption.”

Technology stocks rebounded on Tuesday, a day after the DeepSeek shock rattled markets. The crude market showed little reaction to U.S. weekly data, with crude oil and gasoline stocks rising last week, while distillate inventories fell, according to American Petroleum Institute figures.

In the Middle East, fears of supply disruption in Libya eased after the country’s state-run National Oil Corp reported that export activity was running normally following talks with protesters. Saudi Arabia’s energy minister and several of his OPEC+ counterparts have held discussions following Trump’s call for lower oil prices and ahead of a meeting next week of OPEC+ oil-producing countries, according to official statements and sources.