Will petrol get cheaper in 2026? What UAE drivers should expect

Dubai: UAE motorists are heading into 2026 with fuel prices finally moving in a friendlier direction after a year marked by sharp swings at the pump. January opened with noticeable cuts across petrol and diesel grades, offering some relief after months of volatility and raising expectations that the pressure on household transport costs could ease.

On paper, the case looks convincing. Global oil prices are heading for their steepest annual decline since 2020, weighed down by swelling supply and slower demand growth. Brent crude is down about 18% this year, while US benchmark WTI has fallen nearly 19%, according to Bloomberg data. Forecasts from the International Energy Agency point to a widening surplus through 2026, with supply growth continuing to outpace demand.

Yet the past year has shown that lower crude prices do not always translate into cheaper fuel at UAE stations.

Fuel prices fluctuated sharply through 2025 before easing into the new year. Super 98 started the year above Dh2.70 per litre, climbed as high as Dh2.77 in October, and then fell to Dh2.53 in January 2026. Special 95 followed a similar path, moving between Dh2.63 at its peak and Dh2.42 at the start of this year. EPlus 91 dropped to Dh2.34 in January after spending much of the year above Dh2.50, while diesel eased to Dh2.55 from highs close to Dh2.85 late last year.

The direction into January has been downward, but the bigger lesson for motorists is that pump prices do not move in lockstep with crude.

Vijay Valecha, chief investment officer at Century Financial, says global oil markets are clearly pointing to a softer price environment next year, but the translation to local fuel costs is more complex.

“Global crude oil benchmarks have seen drastic price declines this year, largely driven by rising supply from OPEC+ and fears of an oversupplied market in 2026,” Valecha said. “Just looking at these factors alone paints a weak picture for oil prices going forward. With global oil prices in a downtrend, petrol prices for end users could come down in 2026.”

However, he cautioned that UAE fuel prices are shaped by more than crude alone. The UAE Fuel Price Committee reviews prices monthly based on international refined fuel benchmarks, including S&P Global Platts data, alongside transportation, operating costs, and regional dynamics.

That distinction mattered in 2025. Despite falling crude prices, petrol ended the year more expensive than it began. Super 98 rose from Dh2.61 per litre in January to Dh2.70 in December, while Special 95 climbed from Dh2.50 to Dh2.58 over the same period.

Refining margins have been a key swing factor. The IEA has flagged that refinery outages and tighter fuel rules in Europe pushed refining margins to their highest levels in three years late last year. That made petrol and diesel more expensive to produce even as crude slid.

Geopolitics remains another wild card. US sanctions on Russian oil, attacks on energy infrastructure, and potential new restrictions in Europe could tighten refined fuel supply at short notice. “Any threat of supply disruption due to geopolitical events can quickly push prices higher,” Valecha said.

George Pavel, general manager at Naga.com Middle East, agrees that the broader oil market points to weakness, but with volatility never far away.

“Projections indicate a surplus, with supply growth of about 2.4 million barrels per day far exceeding demand growth of roughly 0.86 million barrels per day,” Pavel said. “That keeps the medium-term trend bearish. If Brent averages around $55 a barrel in 2026, as some forecasts suggest, petrol prices in the UAE could decline.”

Using current market levels and historical behaviour, Valecha estimates Special 95 could trade between Dh2.45 and Dh2.68 per litre next year, while Super 98 may range from Dh2.57 to Dh2.79. He stressed that these are indicative ranges, not forecasts, and that fuel prices in Dubai and WTI “do not move in lockstep.”

A sharp upside scenario would likely require a major supply shock, such as disruptions in key shipping routes or damage to energy infrastructure. Absent that, analysts see prices staying broadly contained.

The outlook is cautiously optimistic rather than definitively cheaper. Lower crude prices help, but refinery economics, geopolitics, and monthly policy decisions will continue to shape what drivers actually pay.

As Pavel put it, “The market expects oversupply, but geopolitical risks could limit how far prices fall.”

For now, January’s lower prices offer some relief. Whether that turns into a sustained trend through 2026 will depend less on oil headlines and more on how global fuel markets, and the UAE’s pricing framework, evolve month by month.

- With inputs from Bloomberg.