Fuel prices remained relatively stable throughout July, with unleaded and diesel trading within a narrow range. The average pump price for unleaded closed the month at 134.8ppl, up 0.6ppl from the start of July. Diesel saw a slightly larger increase, ending at 142.7ppl, up 1.3ppl.
This marks a notable shift from June’s volatility, with a 39.5% reduction in price changes month-on-month. The steadier retail environment was likely driven by calmer wholesale markets. According to data from Portland Pricing, the spread of wholesale diesel prices in July was three times narrower than in June, while unleaded also saw reduced volatility, albeit to a lesser extent at 1.4x.
Portland also highlighted that the retail-to-wholesale price differential was more consistent in July. For much of the month, unleaded margins aligned closely with 3- and 6-month averages, while diesel margins remained slightly below those benchmarks.
However, the final week of July introduced new pressures. The GBP/USD exchange rate weakened from 1.3600 on 23 July to 1.3233 on 31 July, a near 3% drop. This translates to an estimated 1.25ppl increase in wholesale costs. Fortunately, this was partially offset by a $9/bbl decrease in wholesale diesel prices during the same period. Meanwhile, Brent crude rose to $72/bbl, up from $67.50/bbl on 23 July and $66.80/bbl at the start of the month.
Looking ahead to August, diesel margins face upward pressure of 0.5 to 1.5ppl, while unleaded remains neutral. Key global factors include the US tariff expiry dates, which could influence both crude prices and exchange rates. Domestically, the Bank of England is expected to announce a 25-basis point rate cut, with an 83% probability currently priced in.
In terms of infrastructure, the UK fuel supply chain is under increasing strain. The Lindsey Oil Refinery (LOR), located on the Humber, is set to close following the collapse of State Oil and the absence of a buyer. Although LOR was the smallest of the UK’s remaining refineries, it accounted for 10% of national output. This follows the recent closure of Grangemouth, reducing the UK’s refinery count from six to four and cutting total output by 25%.
Compounding supply concerns, diesel and gasoil reserves in the Amsterdam-Rotterdam-Antwerp (ARA) trading hub have fallen to 19-month lows, down 14% year-to-date. These developments could lead to localised supply issues, price spikes, and potential stock outages across the UK.
On the 3rd August OPEC+ announced the unwinding of 547,000 bpd of voluntary cuts in September. This is the final tranche, completing the 2.2million bpd cut program. Originally a timetable of smaller monthly increments had been planned, spreading over 14 months. However, the cuts have been unwound in just six.
