UAE fuel prices out tomorrow: Petrol to get cheaper after four months of rises?

Dubai: UAE motorists are still on course for lower fuel prices in July after four consecutive months of increases, although the expected relief may not be as large as forecast just a few days ago.

Global oil prices have fallen sharply from the highs reached during the Middle East conflict, improving the outlook for motorists. But renewed military exchanges between the US and Iran over the weekend have reminded markets that the path to lower fuel prices may not be straightforward.

Brent crude, the international benchmark, was trading around $73.18 a barrel on Monday, up slightly on the day but broadly in line with the $72 levels seen before the conflict erupted on February 28. US benchmark West Texas Intermediate (WTI) crude rose to $69.96 a barrel.

The recovery follows a dramatic reversal in the oil market. Brent averaged around $106 per barrel in May, when fears over the Strait of Hormuz pushed crude briefly above $110-$120 during the conflict.

For UAE motorists, the difference is significant because local fuel prices are revised monthly using the previous month's average oil prices.

The increases motorists have absorbed over the past four months have been among the sharpest since fuel price deregulation.

In June, Super 98 was priced at Dh3.95 per litre, Special 95 at Dh3.83, E-Plus 91 at Dh3.76, while diesel stood at Dh4.33 per litre. Super 98 has climbed from Dh2.45 per litre in February to Dh3.95 in June, an increase of more than 61 per cent.

A driver filling a typical 60-litre sedan now pays around Dh237, compared with about Dh147 before the conflict. Filling an 80-litre SUV now costs roughly Dh316, around Dh120 more than four months ago.

Those increases reflected a global energy market shaken by disruptions to one of the world's busiest oil shipping routes.

The outlook for July is markedly different from the conditions that shaped June prices.

While June fuel rates reflected May's elevated oil average of around $106 per barrel, Brent crude has spent much of June moving sharply lower, falling from around $95 at the beginning of the month to near pre-war levels in the low $70s.

Because UAE fuel prices are linked to monthly average oil prices rather than daily movements, June's sustained decline is expected to feed directly into July pricing.

The latest rebound to around $73 following renewed missile and drone attacks has trimmed expectations of a steep reduction, but current oil levels still remain far below those that drove June's increase.

Barring a major escalation in the Gulf over the coming days, July still presents the strongest case yet for the first meaningful reduction in UAE fuel prices since the conflict began.

A major reason oil prices have retreated is the gradual recovery in shipping through the Strait of Hormuz. Around 20 per cent of the world's seaborne oil passes through the waterway, making it one of the most strategically important energy routes globally.

Commercial traffic has resumed, and vessel movements have increased significantly compared with the height of the conflict. CNN and MarineTraffic data show traffic through the strait doubled over a 24-hour period to its highest level since late February.

A Liberian-registered oil tanker also successfully exited the Strait of Hormuz using a new route close to Oman promoted by a UN maritime agency, reflecting growing confidence among ship operators.

Shipping activity, though, remains below normal levels, while higher insurance premiums and freight costs continue to support crude prices.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said the market's attention has shifted from the disruption itself to the return of supply.

"The move lower may appear counterintuitive given that the world has just experienced the largest oil supply disruption on record, resulting in an estimated 1.3 billion barrels of lost production from the Middle East. However, in the short term, the market is no longer focused on the barrels that were lost. Instead, attention has shifted to the barrels that may soon return."

Hansen added that millions of barrels remain loaded on tankers that were unable to leave the Gulf during the disruption, while hundreds more vessels are waiting to load.

"The result is a potential surge of supply entering the market at a time when buyers are showing signs of caution."

Norbert Rücker, Head of Economics and Next Generation Research at Julius Baer, said ship-tracking data shows the market has already moved from shortage to surplus.

"Based on ship-tracking data and anecdotal news, oil seems to be flushing out of the Middle East. Exports are likely back above 80 per cent of the pre-crisis normal, which suggests that the market has flipped from deficit to surplus."

He added that emptied storage facilities could begin refilling sooner than expected before the surplus returns next year.

Additional factors are also weighing on prices. Ipek Ozkardeskaya, Senior Analyst at Swissquote, said the return of shipping through Hormuz has coincided with weaker demand and improving supply.

"A combination of strategic inventory releases, a collapse in demand from top buyer China and a substantial number of tankers quietly leaving the Arabian Gulf 'dark' had contributed to a small oversupply in some important markets."

The latest military exchanges have not completely changed that outlook. Warren Patterson and Ewa Manthey, commodities strategists at ING, warned that oil markets may have become too optimistic about how quickly Gulf supplies will fully recover.

"This complacency is odd and clearly leaves significant upside risk if the supply recovery proves slow — or if we see significant re-escalation."

For consumers, though, the overall trend remains encouraging. Susannah Streeter, Chief Investment Strategist at Hargreaves Lansdown's Wealth Club, said: "Fears of a long-lasting global energy crunch induced by the Iran conflict are slinking away, with oil prices sinking back towards pre-crisis levels."

The official July fuel prices will only be announced at the end of June. The latest rebound in crude prices means any reduction is now likely to be more modest than previously expected.

If Brent remains around $72-$74 per barrel through the remainder of June, Super 98 could fall from Dh3.95 towards the Dh3.40-Dh3.60 range, with similar reductions across Special 95 and E-Plus 91.

Diesel could also ease, although diesel prices typically respond more slowly because they are influenced by global freight demand, refining margins and shipping costs.

The final prices will depend on the monthly average crude and refined fuel prices used by the UAE Fuel Price Committee.

The outlook still depends heavily on the fragile diplomatic process between Washington and Tehran.

Although technical talks remain scheduled under the 60-day memorandum of understanding signed earlier this month, tensions have risen again after Iran launched fresh missile and drone attacks on Bahrain and Kuwait following new US air strikes over the weekend.

President Donald Trump said Iran had requested a meeting with US officials, although Tehran denied that any meeting had been arranged. Meanwhile, attacks on commercial vessels have raised fresh concerns over shipping safety in the Strait of Hormuz, reinforcing the risk that oil prices could quickly rebound if supply disruptions worsen.

For UAE motorists, the direction of travel still points towards lower fuel prices in July.

The sharp fall in crude prices through most of June means the monthly average remains well below May's level, supporting the case for the first reduction in pump prices since February.

Even so, the latest military exchanges underline how quickly market sentiment can change. As long as Brent remains close to current levels and shipping through the Strait of Hormuz continues improving, July is expected to break the four-month run of fuel price increases.

The size of that reduction, though, will ultimately depend on whether the fragile peace process holds over the coming days.