Oil slumped on Friday, on track for its biggest monthly drop in six months, after U.S. President Donald Trump stoked global trade tensions by threatening tariffs on Mexico, one of the largest U.S. trade partners and major supplier of crude oil.
Brent crude futures fell $2.28 to $64.59 a barrel, a 3.3% loss, by 11:22 a.m. EDT (1522 GMT). U.S. West Texas Intermediate (WTI) crude futures fell $1.68 to $54.91 a barrel, a 3% loss.
Session lows for both contracts were the lowest since March 8.
Brent futures were on track for an 11% slide in May and WTI for a 14% drop, which would be their biggest monthly losses since November.
Trump vowed on Thursday to ratchet up tariffs unless Mexico stopped people from illegally crossing into the United States. The plan would impose a 5% tariff on Mexican imports starting on June 10 and increase monthly, up to 25% on Oct. 1.
That could hit the lucrative cross-border energy trade.
“U.S. refiners import roughly 680,000 barrels per day of Mexican crude. The 5% tariff adds an extra $2 million to the cost of their daily purchases,” PVM analysts said.
The United States also exports more fuels to Mexico than any other country, according to the U.S. Energy Department, though so far Mexico has not said whether it would retaliate.
The threat compounds concerns about global economic growth, already at risk due to the U.S.-China trade war. That dispute has prompted worries about a recession..
Additional levies by Beijing on the majority of U.S. imports on a $60 billion target list are due to take effect on Saturday. The tariffs are in response to Washington’s move earlier this month to slap further tariffs of up to 25% on $200 billion of Chinese goods.
“The possibility that tariffs could now be placed on crude arrivals from Mexico at the same time that rising Chinese tariffs are threatening to slow world oil demand growth has pushed nearby WTI to below our expected support at the $56 mark,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
A Reuters survey showed Brent crude prices are likely to hold near $70 a barrel for the remainder of the year as elevated supply risks in the Middle East offset risks to demand.