Fuel Price Pulse – 2nd May

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We share our insights into the factors impacting fuel prices, including predictions for fuel costs as we head into next week.

What determines fuel prices?

Wholesale fuel prices determine the price of petrol and diesel at the pump. They are influenced by a range of factors, including crude oil supply, demand, and pricing, 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.

 

Fuel prices this week:

Prices are slightly lower this week, mainly influenced by concerns about an economic slowdown, ongoing uncertainty around US tariffs, and OPEC+ production hikes.

Global economic slowdown

Oil prices have dipped slightly since last Friday amid global economic concerns, particularly signs of a slowdown in China and the US. Weakening industrial activity and sluggish manufacturing output in China have dampened energy demand. Meanwhile, a record-high trade deficit and a sharp decline in consumer confidence have raised fears of reduced economic activity in the United States.

These changes often indicate lower future demand for oil, contributing to the recent price reductions.

US sanctions

US sanctions are still impacting oil prices. However, Beijing is reportedly “evaluating” an offer from the US to engage in trade negotiations. Complicating any talks was a threat from Trump to impose secondary sanctions on buyers of Iranian oil – China is their biggest buyer.

This situation can influence fuel prices at the pump because trade tensions (or progress) between the US and China directly affect global economic activity, affecting oil demand and prices.

OPEC+ production output may fuel oversupply fears

A new Bloomberg survey published on Thursday showed that April output dropped by 200,000 barrels per day (bpd) – instead of the planned hikes. There are expectations that OPEC+ will increase production during June, with big player Saudi Arabia indicating that they are no longer prepared to prop up oil prices with further supply cuts. Eight OPEC+ countries will meet on May 5 to decide on a June output plan. OPEC+ countries are expected to see rising domestic oil consumption in May because of increased cooling demand.

This situation influences fuel prices at the pumps because expectations of increased oil production can lead to oversupply fears, which generally cause crude oil prices to fall. Fuel prices are closely linked to the global price of crude oil.

BP shares drop

The recent fall in oil prices has disrupted BP’s financial planning, contributing to a sharp decline in cash flow and profits, a $4 billion increase in net debt, and shares falling nearly 4%. Market analysts described the results as weak but not surprising.

Lower oil prices and weak corporate earnings from major oil producers like BP can reduce consumers’ fuel costs. However, if oil companies cut production or investment in response to financial strain, this could tighten supply in the longer term and push prices back up.

The pricing outlook for next week

We anticipate the market will trade stably going into next week.

 

General factors that influence oil and fuel pricing:

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

Please speak to our team for more information on fuel card pricing, including advice on how to save time and money on fuel management. 

 

The information provided in this post is for information only. It does not constitute financial advice. Pricing predictions are speculative and should not be relied upon for forecasting.