Brent crude prices fell sharply through June, declining from $96.74/bbl at the start of the month to $71.24/bbl by month-end, representing a 26% fall. The decline followed the signing of a Memorandum of Understanding between the United States and Iran aimed at bringing a temporary halt to their months-long conflict and restoring energy flows through the Strait of Hormuz.
Under the agreement, the US committed to lifting its naval blockade and temporarily waiving sanctions on Iranian oil exports during a 60-day negotiation period, with both parties targeting a permanent settlement before the agreement expires. Iran stated that commercial shipping through the Strait of Hormuz would return to pre-conflict levels within 30 days, allowing time for mines and other navigational hazards to be cleared.
The agreement effectively removed almost all of the geopolitical risk premium that had been built into crude markets during the conflict, returning Brent prices to levels last seen before US and Israeli strikes against Iran at the end of February. Although isolated attacks on commercial vessels continued throughout the second half of June, markets largely viewed these incidents as localised rather than as a threat to sustained regional supply.
📊 At a Glance
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Refined product markets also weakened during June, although the decline was considerably more modest than that seen in crude. Diesel prices decreased by 13.5%, while unleaded declined by 5.5%. Despite the correction, diesel and unleaded wholesale prices remain 11-12ppl above the end of February.
The slower decline in diesel reflects the fact that refined product markets remain considerably tighter than crude. Inventories across the Amsterdam-Rotterdam-Antwerp (ARA) storage hub remain historically low, with gasoil stocks ending June around 3% below year-earlier levels despite modest improvements during the month. US distillate inventories also remain close to two-decade lows, with stocks approximately 10% below the five-year average despite a gradual recovery in refinery output. These factors continue to provide underlying support for diesel cracks even as crude prices have retraced.
💷 What This Means For YouSupermarket diesel prices have already fallen by around 18p per litre during June. Future price cuts are likely to depend more on competition between local filling stations than wholesale fuel prices alone. |
Improving supply fundamentals are, however, beginning to emerge. US refiners increased distillate production through the latter half of June, while inventories started to rebuild as export demand softened. At the same time, US drilling activity recorded its strongest weekly increase in four years, suggesting producers remain confident in expanding crude production despite lower outright prices.
Perhaps the most notable development during June was the pace at which retail diesel prices fell. Supermarket diesel prices declined by approximately 18ppl during the month, while the wider market fell by around 15ppl, significantly faster than movements in wholesale prices alone would suggest. Much of this reflected wholesale price reductions that occurred in the final week of May, which only filtered through to retail forecourts during early June.
As a result, the wholesale-to-retail pricing spread has now largely returned to its six-month average. With the spreads having normalised, the scope for further significant pump price reductions will increasingly depend on localised market competition.
Looking ahead, market attention remains firmly focused on developments in the Middle East as negotiations between the US and Iran enter the midpoint of the 60-day agreement. While the reopening of the Strait of Hormuz has substantially improved the global supply outlook, tanker movements have yet to normalise fully and periodic security incidents continue to highlight the fragility of the current ceasefire. Consequently, although the extreme geopolitical risk premium has largely dissipated, energy markets remain sensitive to any signs that negotiations could stall or regional tensions could re-escalate.