Fuel Price Pulse – 29th 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?

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

Oil prices are slightly lower in comparison to last week. 

Geopolitical tensions and the impact on fuel prices: 

Prices started the week higher due to renewed concerns about the Ukraine conflict, as tensions escalated in the region. 

Tensions in Eastern Europe continue to unsettle markets, especially given Russia’s role  as a major oil exporter. Any escalation could disrupt energy supplies and increase prices.

However, midweek developments saw a slight reduction in prices. Israel and Hezbollah agreed to a 60-day ceasefire that began at 4 a.m. local time today. This truce follows significant damage inflicted by Israel on the Iranian-backed Hezbollah militia. While the ceasefire initially reduced geopolitical risks, oil prices rose slightly after reports of a potential violation of the truce. Israeli military tanks fired into southern Lebanon, claiming that suspicious vehicles and individuals had entered the border zone. 

Ceasefires in volatile regions temporarily ease concerns, but violations or renewed fighting can quickly reverse market sentiment.

OPEC+ Meeting Postponement and Its Impact:

Another key factor influencing the market is the upcoming OPEC+ meeting, originally scheduled for December 1 but postponed to December 5. 

Russia, Saudi Arabia, and other OPEC+ members have been holding discussions over potential changes to oil production. There is speculation that OPEC+ might announce deeper production cuts or extend existing ones to stabilise prices. Any decision to limit supply further would likely push prices higher in the coming weeks. 

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

We predict that fuel prices will rise slightly next week, as markets prepare for the OPEC+ meeting and react to uncertainties surrounding the Israel-Hezbollah ceasefire. The combination of potential production cuts, seasonal demand increases, and geopolitical factors could create upward pressure on prices.