By Robert Harvey and Georgina McCartney
LONDON/HOUSTON (Reuters) - U.S. President Donald Trump's trade tariffs on Canadian and Mexican oil imports will offer European and Asian refineries a competitive advantage against their U.S. rivals, analysts and market participants told Reuters.
Trump on Saturday ordered 25% tariffs on Canadian and Mexican imports and 10% on goods from China starting on Tuesday to address a national emergency over fentanyl and illegal aliens entering the U.S., White House officials said. Energy products from Canada will have only a 10% duty, but Mexican energy imports will be charged the full 25%, they said.
The tariffs on the two biggest sources of U.S. crude imports will raise costs for the heavier crude grades U.S. refineries need for optimum production, industry sources said, cutting their profitability and potentially forcing production cuts.
That provides refiners in other markets an opportunity to make up the difference. The U.S. is currently an exporter of diesel and importer of gasoline.
"Less U.S. diesel exports would support European margins, while more export opportunities may remain in the strongly pressured gasoline market," consultancy Vortexa's chief economist David Wech said.
"So overall a positive for European refiners, but likely not for European consumers," he added.
"European margins may improve because the U.S. Northeast will have to import more gasoline," an executive at a brokerage said. "I think European and Asian refiners are the big winners."
Tariffs would also likely force impacted crude sellers to discount prices to find buyers, said Matias Togni, founder of analytics firm Next Barrel. Asian refiners are well poised to soak up that discounted Mexican and Canadian crude, something that could also buoy their profit margins, he said.
Asian refiners could get the competitive advantage because they have the equipment to run heavy crudes and are also in the midst of raising their run rates, said Randy Hurburun, head of refining at Energy Aspects.
The Trans Mountain pipeline expansion (TMX) in Canada, which launched last May, means the pipeline can now ship an extra 590,000 barrels per day to the Canadian Pacific Coast.
Higher TMX shipments to China could substitute imports from Venezuela and Saudi Arabia, trading sources said.
Asia-Pacific refiners could also exploit fuel arbitrage opportunities to the U.S. West Coast, which might be hit by higher feedstock costs incurred from sourcing crude from further afield, Vortexa's Wech added.