UAE fuel outlook: Will petrol prices keep falling after July's sharp cut?

Dubai: UAE motorists are seeing fuel prices move lower again after July's reduction, reflecting the easing in global oil prices following months of exceptional volatility triggered by the Middle East conflict.

The UAE Fuel Price Committee lowered prices across all fuel grades for July after international crude prices retreated sharply from the highs seen earlier this year.

From July 1, Super 98 costs Dh3.40 per litre, down from Dh3.95 in June. Special 95 fell to Dh3.29 from Dh3.83, while E-Plus 91 dropped to Dh3.21 from Dh3.76. Diesel declined to Dh3.60 from Dh4.33.

The reduction follows the UAE's monthly fuel pricing mechanism, introduced in 2015, under which retail fuel prices are reviewed each month based on average global crude oil and refined fuel prices. As international prices rise or fall, local pump prices adjust accordingly.

For motorists, July's revision offers noticeable savings. A 60-litre tank of Super 98 now costs about Dh204, compared with Dh237 in June. Filling an 80-litre SUV costs around Dh272, down from about Dh316 a month earlier.

2025 fuel costs

Despite July's reduction, pump prices remain above the levels seen a year ago after the sharp run-up in global energy prices during the first half of 2026.

July 2026 compared with July 2025:

• Super 98: Dh3.40 vs Dh2.70 (+26%)

• Special 95: Dh3.29 vs Dh2.58 (+28%)

• E-Plus 91: Dh3.21 vs Dh2.51 (+28%)

• Diesel: Dh3.60 vs Dh2.63 (+37%)

A driver filling a typical 60-litre sedan with Special 95 now pays around Dh197, compared with approximately Dh155 in July last year.

For an 80-litre SUV using Super 98, a full tank costs about Dh272, around Dh56 more than it did a year ago.

July prices ease

July's reduction reflects a significant change in global oil market conditions. Brent crude briefly climbed above $120 per barrel after disruptions to shipping through the Strait of Hormuz raised concerns over global energy supplies.

Around 20% of the world's seaborne oil passes through the waterway, making it one of the most closely watched routes in global energy markets. Market sentiment improved after the United States and Iran agreed to a ceasefire framework in mid-June that included a 60-day truce and an agreement to reopen the Strait of Hormuz.

The agreement significantly reduced the supply-risk premium that had driven oil prices higher. Brent ended the second quarter with its steepest quarterly decline since 2020, settling near $73 per barrel by the end of June.

The broader supply outlook has also improved after OPEC+ approved its fourth consecutive production increase since the Hormuz disruption, adding around 188,000 barrels per day for July and bringing cumulative quota increases since April to almost 600,000 barrels per day.

The producer group has also revised its 2026 global oil demand growth forecast to 970,000 barrels per day, contributing to expectations of a more balanced market. Together, these developments have helped restore greater balance to global oil markets after several months of exceptional disruption.

Global forecasts

The easing in oil prices has prompted major energy agencies and investment banks to revise their forecasts lower for the second half of 2026.

The US Energy Information Administration (EIA) expects Brent crude to average around $105 per barrel in June and July before falling below $80 during the third quarter and easing towards $70 by the end of the year. The agency cited weaker global oil demand together with the gradual recovery of Strait of Hormuz exports.

Goldman Sachs lowered its fourth-quarter Brent forecast to $80 per barrel, down from $90, and said prices could move towards $70 if Gulf supplies recover faster than expected.

Morgan Stanley revised its forecasts to $90 for the third quarter and $80 for the fourth quarter after reassessing the pace at which oil exports could normalise following the US-Iran breakthrough.

Among the major banks, Citi has one of the most conservative oil price outlooks, forecasting Brent at $75 in the third quarter, $70 in the fourth quarter and an average of $65 in 2027.

Goldman Sachs has also lowered its 2027 Brent forecast to $75, noting that prices could move closer to $60 if supply recovery outpaces demand growth.

Broad consensus

• EIA: Brent below $80 in Q3 and around $70 by year-end.

• Goldman Sachs: $80 in Q4, with downside towards $70.

• Morgan Stanley: $90 in Q3 and $80 in Q4.

• Citi: $75 in Q3, $70 in Q4 and $65 average in 2027.

If these forecasts materialise, they would provide a supportive backdrop for further stability—or gradual easing—in UAE fuel prices over the coming months.

Outlook still evolves

While the broader trend points towards lower oil prices, analysts caution that uncertainty remains.

Stephen Innes, Managing Partner and Market Analyst at SPI Asset Management, said the market has moved beyond the initial phase of disruption because the global oil system proved more resilient than expected.

"Oil has moved beyond the first panic phase because the physical system has proved more resilient than feared." He noted that global energy markets do not require the Strait of Hormuz to operate at full capacity in order to function.

"Hormuz does not need to run at full capacity for the market to function. Around 70% traffic, plus pipeline alternatives and inventory drawdowns, can keep the lights on."

Innes said the recent decline in oil prices has been supported by strategic stock releases and inventory drawdowns. "The barrels that calmed the market came from somewhere: China's reserves, IEA emergency releases and delayed buying by importers."

He believes governments could eventually begin rebuilding those emergency reserves. "The next oil bid may not come from another dramatic disruption. It may come from governments quietly rebuilding the cushions they have just used."

He added: "The next move in oil may not be driven by another escalation in the Gulf. It may come from a quieter realization: the world used a lot of barrels to get through this one, and now it wants them back."

Hormuz still in focus

Energy markets continue to monitor activity through the Strait of Hormuz. Commercial shipping has resumed and tanker traffic has improved, but insurance costs remain elevated and vessel movements have yet to fully return to normal.

ING commodities strategists Warren Patterson and Ewa Manthey said recent oil prices suggest traders may be assuming a faster recovery than conditions currently justify.

"This complacency is odd and clearly leaves significant upside risk if the supply recovery proves slow — or if we see significant re-escalation." They noted that tanker movements remain below earlier peaks, while discussions between Washington and Tehran continue.

These developments will remain important because any renewed disruption to global oil supplies could influence future international crude prices, which in turn feed into the UAE's monthly fuel price reviews.

What to expect

The current outlook suggests the exceptional volatility seen earlier this year has begun to ease.

Most likely scenario:

• Brent remains in the $70-$80 range.

• UAE fuel prices broadly stabilise, with scope for gradual further easing.

• Any future monthly reductions are likely to be smaller than July's cut.

If oil prices rise again:

• Geopolitical tensions increase.

• Shipping through the Strait of Hormuz slows.

• Brent moves back above $80-$90.

• UAE fuel prices could stabilise or move modestly higher.

If supply improves faster:

• Gulf exports recover more quickly.

• OPEC+ production increases continue.

• Brent trends closer to $70.

• UAE motorists could see additional fuel price reductions later this year.

Looking ahead

July's reduction reflects improving conditions in global energy markets after an extended period of disruption.

The consensus among energy agencies and investment banks points towards a more balanced oil market during the second half of 2026, although forecasts remain subject to changes in geopolitical developments and supply conditions.

For UAE motorists, the monthly pricing mechanism means any sustained decline—or increase—in international oil prices will continue to be reflected in pump prices as global market conditions evolve.