Fuel Price Pulse – 15th November

Robin, Customer Success Manager at The Fuel Store, shares his insights into the factors impacting fuel prices, including his predictions for fuel costs as we head into next week.

What determines fuel prices?

The price you pay for petrol and diesel at the pumps is governed by wholesale fuel prices. Wholesale prices are influenced by a range of factors, including supply, demand and pricing for crude oil, oil refinery production levels, the pound-to-dollar exchange rate, socio-economic and political factors that might impact production/demand, the margin (profit) taken by fuel retailers, and fuel duty and VAT charged by the Government.

Factors influencing fuel pricing this week

Fuel prices have increased slightly compared to this time last week, due to a mix of political, economic, and market-driven factors.

Impact of the Trump Administration

At the beginning of the week, oil prices dipped following the announcement of policies by Trump’s new administration. Wall Street figures have described the administration as “unstable with a lot of noise,” with concerns that unpredictability may lead to market volatility. This volatility arises as traders respond to policy changes and potential geopolitical disruptions relating to the administration’s decisions.

The Trump administration has prioritised “energy dominance,” focusing on increasing domestic oil and gas production, expansion of drilling, and relaxing of regulations. These measures could lead to a boost in U.S. oil supply, which might push prices down if global demand does not rise to match the increased production. However, the administration’s actions on international relations, particularly with oil-producing nations, could have the opposite effect, creating supply uncertainties and driving prices higher.

China’s Role in Oil Markets

China, as one of the world’s largest oil consumers, plays a critical role in shaping global oil demand. Recently, China announced a $1.4 trillion economic stimulus package aimed at boosting its economy. However, many experts believe this effort may fall short of significantly increasing oil demand. Weak economic growth in China can limit industrial activity, transportation, and manufacturing—all key drivers of oil consumption.

China’s stimulus plan is important for oil markets because it sends a signal about the country’s economic trajectory. A strong recovery in China could boost global oil demand, while a sluggish response could dampen it. Markets are closely watching whether this stimulus will revive economic activity enough to lift oil consumption.

Current Market Trends

By the end of the week, oil prices experienced a modest rise. One key factor was the release of the American Petroleum Institute (API) report, which revealed a decline in U.S. crude oil stock by 770,000 barrels. Lower inventories often signal tighter supply, which can support higher prices. Traders are also anticipating the Department of Energy (DOE) report, expected to show an even larger drop in U.S. crude supply. A sharper-than-expected decline would reinforce concerns about supply shortages and could push prices further upward.

Middle East tensions

Global oil prices are also being influenced by geopolitical concerns. Recent tensions in the Middle East have raised fears about potential disruptions to oil production and supply routes, which could further strain global oil availability.

Next week’s fuel prices

Given these developments, we expect oil and fuel prices to continue their upward trend heading into next week.

In summary, while fuel prices have risen slightly this week, the market remains highly sensitive to political actions, economic policies, and supply dynamics.