The recent reprieve on fuel prices is likely coming to an end. While we’ve had a reprieve over the last month, this has been driven by a combination of optimism that a solution to the crisis will be found soon and a drawdown of inventories.
Unfortunately for everyone, we are running out of time on both fronts. As the conflict drags on with little diplomatic progress, optimism is waning, and available reserves are steadily getting eaten up.
⛽ Brent crude opened this week above $110 this week and has traded above $112.
⛽ The IEA warned last week that global markets face a 1.8 million bpd shortfall for 2026.
⛽ Global oil inventories fell 246 million barrels in March and April alone, a record drawdown and burning through more than 30% of the estimated total useable reserves.
⛽ The fuel excise cut expires 30 June and no extension was included in last week's budget.
The oil math at the moment is brutal. Even in the IEA's best case (conflict ends early next month, flows gradually resume from August) the market doesn't return to balance until October. That’s well past the early-June timeline for Asian oil markets to start experiencing operational stress. And the longer the conflict drags on the worse the situation gets. At the current rate of drawdown, the world will be out of usable reserves by October.
The only way to balance this kind of supply disruption is higher prices.
For SMEs, especially those exposed to fuel prices, it's imperative to be modeling sharply higher fuel prices into Q3 of this year. If oil prices stay above $110, we are looking at petrol north of $2.50 and diesel above $3.50 from 1 July. That’s a big step up from where we are now and the kind of price shock that needs to be planned for now.