Fuel Price Pulse – 27th December

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?

Wholesale fuel prices govern the price you pay for petrol and diesel at the pumps. 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

The market is trading stably, with prices down compared to this time last week.

At the start of the week, prices dipped slightly following weaker-than-expected US inflation data.  US core inflation fell to 0.1% in November compared to expectations of 0.3% and 0.3% the previous month.

During the week oil prices demonstrated a gradual rise, influenced by multiple market factors. 

Brent crude prices closed at $74.17 per barrel on December 27, reflecting a 1.2% daily increase and a weekly gain of approximately 1.4%. This price increase reflects growing optimism about a recovery in global demand, particularly from China, as the government continues rolling out economic support measures. Recently announced measures include the approval of a $3 trillion treasury bond for 2025, following previous monetary-support packages and structural reform initiatives aimed at boosting economic growth.

The momentum was supported by a larger-than-expected draw in U.S. crude oil inventories, with a 4.2 million barrel reduction reported by the Energy Information Administration. This exceeded analysts’ expectations and highlighted heightened refinery activity and increased holiday season fuel demand.​

Supply, demand and other factors

• While geopolitical tensions can cause market uncertainty – especially in oil-producing regions such as the Middle East and Russia – global economic performance can also slow demand and impact prices. 
• Oil is traded in U.S. dollars, so fluctuations in the dollar’s value impact oil prices. A stronger dollar makes oil more expensive for other currencies, potentially lowering demand. 
• Seasonal factors like winter heating demand in the Northern Hemisphere can also increase oil consumption and pricing. 

Next week’s fuel prices

Looking ahead, we anticipate the market will trend slightly higher heading into next week. Concerns about potential oversupply in 2025, stemming from increased global production and the potential slowing of China’s demand, remained in focus.