Will UAE Fuel Prices Drop in November?

Could Fuel Prices Drop in November in UAE?

In the United Arab Emirates, residents eagerly await the official announcement of fuel prices at the end of each month. The fluctuating monthly prices for petrol and diesel significantly impact not only motorists but also the cost structures of logistics, shipping, and transport companies. As the end of October approaches, indications suggest that November could see moderated price reductions, provided there is no significant price increase in the global crude oil market, following recent trends.

The Role of Global Oil Prices in UAE Pricing

The UAE's unique fuel pricing mechanism adjusts retail prices monthly according to global oil market trends. The Fuel Price Committee announces the new prices on the last day of every month, which are applicable from the first day of the following month. The system aims to ensure transparency and market-based price regulation, which also encourages more conscious fuel consumption.

In October, the average price of Brent crude oil was around $65.22 per barrel, compared to approximately $67 in September. This declining trend suggests the potential for minor price reductions in November for Super 98, Special 95, and E-Plus 91 fuels.

Relief After October's Increase?

It is noteworthy that in October, there was a seven fil increase per liter for all fuel types. The price of Super 98 reached 2.77 dirhams per liter, Special 95 was priced at 2.58 dirhams, and E-Plus 91 cost 2.71 dirhams. While this increase was considered moderate, it was still felt by frequent refuelers, especially those covering longer distances regularly.

What's Happening in the Global Market?

In the first half of October, Brent prices occasionally dipped below $61, marking a near five-month low. This drop was primarily due to fears of oversupply, explained by the slowing global economic growth and expansion of new production projects. However, in recent days, prices have risen again, partly due to sanctions announced by the United States affecting several Russian oil companies. As of Friday evening data, WTI closed at $61.61, and Brent at $66.05.

Forecasts: Optimism and Caution Hand in Hand

International analysts hold differing views. The Bank of America previously forecasted an average price of $55 per barrel, suggesting that the stability of Asian demand and production discipline among OPEC+ member countries offer market support. Conversely, Citigroup analysts believe that easing geopolitical risk premiums and global economic slowdown could lead Brent prices to fall to as low as $50.

According to an analyst from XMArabia, market pressure is expected to intensify, especially as global daily supply could increase by 3 million barrels by 2025, while demand growth might only be around 700,000 barrels annually. Further supply expansion of 2.4 million barrels is expected by 2026, forecasting sustained oversupply and consequently lower prices.

Geopolitics Still Plays a Role

Despite fundamental market forces leaning towards price reductions, geopolitical events frequently intervene. Uncertainty around Russian export capacity, restrictions on Iranian production, and tensions affecting maritime shipping routes continue to generate a price premium. This type of "uncertainty premium" can reverse the declining trend in the short term, as seen in recent days.

What Does This Mean for UAE Residents?

Fuel price developments not only affect residents using cars but also directly impact the logistics sector, food supply, package delivery, and taxi and transport services. Since most companies adjust freight rates monthly according to current fuel prices, even a small reduction could positively influence end-user service prices.

For businesses and families, a minor price correction would be favorable, especially ahead of the upcoming festive season when travel and shopping activities might increase.

When Will November's Price be Announced?

The UAE's official Fuel Price Committee is expected to announce the prices for November on October 31. The decision will be based on global oil market averages, current geopolitical conditions, and the internal supply chain's stability.

Conclusion

Although the volatility of the global crude oil market makes predictions unpredictable, current trends do not rule out a slight drop in fuel prices in the UAE in November. However, much depends on how Brent and WTI close in the last days of October. Both residents and businesses are hoping for favorable changes, but ultimately, the decision remains with the market.

(The article is based on industry experts' forecasts.)