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Oil prices have moved up slightly, but gains remain limited as markets react to the newly implemented 25% U.S. tariff on Canadian and Mexican crude. The measure has introduced uncertainty, with traders assessing its potential impact on supply chains. The U.S. administration has upheld its decision, enforcing the levy as part of efforts to pressure Canada and Mexico to curb fentanyl shipments (fentanyl is being linked to it because the U.S. government is using oil tariffs as a political and economic tool to pressure Canada and Mexico to act on fentanyl trafficking.)

While the tariffs were anticipated, their formal implementation has kept prices in check. At the same time, a recent winter storm in the U.S. reduced fuel demand and disrupted refinery operations, leading to a 3.5 million-barrel rise in crude stockpiles, exceeding the expected 3.2 million-barrel increase. Harsh weather cut travel and industrial activity, lowering gasoline and diesel consumption, while refinery slowdowns and supply chain disruptions delayed crude processing, causing inventories to build up.

On the global supply front, the latest U.S. sanctions on Russia are beginning to constrain crude exports. Shipments from Russia’s western ports are projected to decline by 8% in February as Moscow shifts more oil toward domestic refining.

Attention is now turning to the upcoming OPEC+ meeting on February 3, where member nations, including Russia, will evaluate their response to U.S. production policies. The U.S. remains committed to expanding domestic oil and gas output, reinforcing its position as the world’s largest producer. Additionally, Washington has linked lower oil prices to broader geopolitical objectives, including its stance on the Ukraine conflict.

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Despite concerns over a possible price war, analysts suggest that OPEC+ and U.S. producers are unlikely to engage in aggressive competition, as excessive supply could hurt both sides. Instead, the focus is expected to remain on balancing production strategies amid shifting global demand and geopolitical uncertainty.