Throughout May 2024, global oil prices experienced a period of relative stagnation, largely attributed to an oversupply of crude and weakened demand, particularly in the Asian market.
Anticipated Drop in UAE Fuel Prices for June
The Brent crude benchmark primarily hovered between $82 and $83 per barrel, averaging $83.35 for the month. This marked a significant decrease from the previous month's average of $88.79. The abundant crude supply coupled with diminished demand in Asia contributed to this downward trend in oil prices.
Fuel price prospects for June
As a result of the subdued global oil prices observed in May, expectations are high for a decrease in fuel prices in the United Arab Emirates (UAE) for the upcoming month of June. The UAE's Fuel Price Committee routinely reassesses retail petrol rates on the final day of each month to align with fluctuations in global crude prices, adhering to the nation's deregulation policy.
In May, petrol prices in the UAE experienced their fourth consecutive month of increase, primarily driven by geopolitical tensions in the Middle East, which exerted upward pressure on global rates. During this period, Super 98 was priced at Dh3.34 per liter, Special 95 at Dh3.22 per liter, and E-Plus at Dh3.15 per liter. These figures represented the highest prices recorded in the past seven months.
Vijay Valecha, Chief Investment Officer at Century Financial, attributed the earlier-year surge in oil prices to geopolitical tensions in the Middle East and production cuts implemented by the Organization of the Petroleum Exporting Countries (OPEC) and its allies. However, since early April, prices have moderated due to ample supply outside the OPEC+ alliance and weakened demand in Asia. Valecha noted that the forthcoming OPEC+ meeting is expected to result in an extension of production cuts into the second half of 2024.
Meanwhile, Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, highlighted several factors supporting further oil price gains, including ongoing geopolitical tensions, rising US demand heading into the summer months, and China's efforts to stabilize its property market. Despite this positive sentiment, Ozkardeskaya cautioned against the risk posed by a potential slowdown in the reflation trade. Any tempering of rate-cut plans by central banks could significantly impact the outlook for the outlook for oil demand and impede price recovery.
While global oil prices remained subdued in May, the UAE anticipates a decline in fuel prices for June, reflecting the broader trends in the oil market and geopolitical landscape.