Oil prices jumped on Monday after US President Donald Trump imposed tariffs on Canada, Mexico and China, raising concerns about disruptions to crude supplies from the two biggest suppliers to the US, but the prospect of lower fuel demand capped gains.

U.S. West Texas Intermediate crude futures were at $73.89 a barrel, up $1.36, or 1.88%, by 0656 GMT, after hitting their highest since Jan. 24 at $75.18 a barrel earlier in the session.

Brent crude futures rose 73 cents, or 0.96%, to $76.40 a barrel, after hitting a high of $77.34.

Trump on Saturday ordered sweeping tariffs on goods from Mexico, Canada and China, sparking a trade war that could hurt global growth and reignite inflation.

Canadian energy products would be subject to a 10% tariff, but Mexican energy imports would be subject to a full 25% tariff, White House officials said.

"The relatively soft stance on Canadian energy imports is likely rooted in caution," Barclays (LON:BARC) analyst Amarpreet Singh said in a note.

"Tariffs on Canadian energy imports would likely be more disruptive to domestic energy markets than tariffs on Mexican imports and may even be counterproductive to one of the president's key goals - lowering energy costs."

Goldman Sachs analysts said the tariffs would have a limited short-term impact on global oil and gas prices.

Canada and Mexico are the top sources of US crude imports, together accounting for about a quarter of the oil processed by US refineries into fuels such as gasoline and heating oil, according to the US Department of Energy.

The tariffs would raise the cost of the heavier grades of crude that US refineries need for optimal production, industry sources said, cutting into their profitability and potentially forcing production cuts.

U.S. gasoline futures jumped 2.66% to $2.1136 a gallon after hitting $2.162 earlier, the highest since Jan. 16.

The tariffs have benefited near-term oil prices because of the risk of supply disruptions, especially for heavier grades, said Saul Kavonic, energy analyst at MST Marquee.

However, oil prices are likely to fall after the next quarter as the tariffs further worsen the demand outlook and as OPEC+ comes under greater pressure from Trump to end production cuts, he added.

The Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, are unlikely to change their existing plan to gradually increase output when they meet on Monday, delegates from the producer group told Reuters, despite pressure from Trump.

Source: Investing.com