Are UAE Fuel Prices Set to Drop?

Fuel Prices in the UAE: Will 2026 See a Drop?

Residents and businesses in the United Arab Emirates keenly await each month's end for the announcement of new fuel prices, as these directly impact daily life – from transportation and logistics costs to family vehicle maintenance. As January 2026 approaches, the question arises once more: will fuel prices drop at the start of the new year?

December Global Oil Prices: Moderate Decline

In December 2025, global oil prices displayed a somewhat restrained picture. The average closing price for Brent crude in December was $61.51 per barrel, compared to November's $63.7. The movements in crude oil prices are closely linked to geopolitical situations, changes in supply and demand, and global strategic stock management.

In the UAE, fuel prices have been aligned with global markets since 2015, when the government ended state subsidies for gasoline and diesel as part of the country's economic diversification policy. This means local prices are adjusted monthly based on international oil prices.

December 2025 Prices Saw an Increase

In December 2025, UAE fuel prices increased: the price of Super 98 rose to 2.70 dirhams per liter, Special 95 to 2.58 dirhams, and E-Plus to 2.51 dirhams. This hike was attributed to earlier global market events, particularly geopolitical tensions, such as instability in Venezuela or the conflict between Ukraine and Russia.

These events highlighted global supply risks, which always significantly impact commodity markets. Although short-term demand softened and stocks increased, the long-term prospects indicate serious structural challenges.

Structural Risks Lurking

Oil market experts, including Ole Hansen, Head of Commodity Strategy at Saxo Bank, state that while a stable surface picture emerges, serious structural tensions lie beneath. According to the International Energy Agency (IEA), global demand is not decreasing; in fact, growth is expected even after 2040, while current oil well depletion could result in an annual shortfall of 6-8 million barrels.

This means the industry must continuously produce very large amounts of new supply, or future severe supply issues may arise.

What to Expect in Early 2026?

Short-term forecasts do not indicate an excessive supply for early 2026. The oil futures market does not yet show significant shifts towards "contango" – meaning there is no sign that future prices would be dramatically higher than current prices, which would be typical of an oversupply situation. Storage costs also do not strongly incentivize traders to buy now and stockpile for later sales.

Based on this, any potential price decrease at the beginning of the year is more likely to be temporary than a long-term trend.

What Influences UAE Fuel Prices?

Factors affecting UAE fuel prices include:

- global oil market developments (Brent and WTI rates),

- geopolitical tensions (such as the situation in Venezuela or Russia),

- changes in global supply-demand relationships,

- OPEC+ production policy,

- extraction capacity of non-OPEC+ members like the USA, Brazil, and Guyana,

- and political and economic constraints on supply from Iran, Russia, or Venezuela.

Why Is This Important to Residents and Businesses?

Fuel prices affect not only drivers but the entire economy. Price increases can make transportation more expensive, impacting freight charges, logistics costs, and ultimately, inflation. Likewise, any potential decrease in prices could ease expenses, creating a more favorable operating environment for businesses.

Many try to fill up their vehicles at the end of the month at old prices, or delay major trips until new price levels are announced.

Investor Perspective: Pricing Strategy or Price Shock?

From an investor's perspective, the question is whether the market will encourage long-term investments with stable, gradual price increases, or if these investments will be lacking, forcing a sudden price surge to initiate new supplies later. The former approach would lead to fewer economic disruptions, while the latter would be more painful and harder to manage.

Summary

Although UAE fuel prices rose in December 2025, forecasts for January 2026 suggest a slight decrease could occur. However, decisions are made within the complex system of global oil market movements and geopolitical events. Local residents and businesses should keep a close eye on the end-of-month announcement, as the new price levels may impact daily living costs.

Long-term oil market outlooks warn that the current relatively low prices may not be sustainable for long – and both governments and market players must prepare for changes that will inevitably occur in the coming years.

(The article is based on accounts by commodity strategists.)