Fuel Prices Drop Looms: Reasons and Outlook

In May, fuel prices in the United Arab Emirates are likely to continue decreasing, following a steady decline observed in April for the second consecutive month. In April, the price per liter for Super 98 fuel was 2.57 dirhams, for Special 95 it was 2.46 dirhams, and for E-Plus 91 it was 2.38 dirhams. This price reduction is attributed to global economic concerns, trade tensions, and uncertainties in oil demand.

Why are prices falling?

One of the main reasons is the sharp decline in global oil prices. The price of Brent crude oil dropped to 62.8 dollars per barrel at the beginning of April, one of the lowest values in recent times. Throughout the month, Brent typically moved in the 60-dollar range, closing April with an average of 66.6 dollars, compared to an average of 71 dollars in March. The price of West Texas Intermediate (WTI) oil showed a similar movement, hovering around 63.13 dollars.

The trigger for the decline in global prices includes the intensification of trade wars between the USA and other countries, as well as the threat of global economic slowdown. Investors are increasingly worried about a recession, which reduces industrial demand for oil, thereby pushing down prices.

OPEC+ and production increase

The pressure was further heightened by the OPEC+ decision, which increased oil production at a faster pace than expected. This step resulted in even more supply surplus in the global market, further lowering prices. While demand for oil remains unchanged, the sudden increase in supply always drives prices down.

The role of geopolitical factors

Geopolitical tensions also affect oil prices. The US government imposed new sanctions against the Iranian oil trade network and announced a 25 percent tariff on countries importing Venezuelan oil. Although these measures have limited short-term impact, the market interprets these actions as a warning that maintaining low oil prices is not necessarily a primary goal compared to broader geopolitical objectives.

What to expect in May?

Fuel prices in the UAE have been tied to current international market prices since the country liberalized prices in 2015. This means that global market trends directly affect local prices, which are updated monthly, usually on the last day of the month.

Based on current trends, considering the softness in April oil prices, May prices could also decrease. This could be good news for motorists, transporters, and other fuel-intensive industries.

What to watch for?

According to Saxo Bank’s forecast for the second quarter, Brent crude prices are expected to move in the range of 65 to 85 dollars. This is a fairly wide range, and primarily, geopolitical decisions, economic data, and market sentiment will shape the direction in the coming months. If Brent prices remain stable around 65 dollars, further reductions in UAE fuel prices can be anticipated.

Review: Fuel Prices 2024–2025

Over the past year and a half, UAE fuel prices have shown significant fluctuations, adapting to the swings of the global energy market. While prices peaked in the summer of 2024, significant corrections followed due to economic developments at the end of the year and the start of 2025.

Summary

A decrease in May fuel prices is almost certain in the UAE, driven by falling global oil prices, supply pressures, and economic uncertainties. This could provide relief to both the public and businesses – at least in the short term. However, energy prices remain vulnerable to geopolitical and market developments, so careful monitoring remains essential.

(Source of the article is Saxo Bank's report.)