Oil Prices Forecast to Plunge Offering Welcome Relief for UK Motorists

Motorists across the United Kingdom are set to benefit from lower fuel costs in the coming year, as the price of oil is projected to fall to its lowest level in five years. Forecasts from investment giant Macquarie suggest Brent crude could drop from approximately 66 dollars per barrel to the mid 50s in 2026, the decline driven largely by a mounting global oversupply.

Robust oil production in the United States, in tandem with increased output from the Saudi led Opec cartel, has contributed to a daily surplus expected to reach three million barrels this year. Demand growth, by contrast, is lagging behind at only 700000 barrels per day. This imbalance is expected to exert further downward pressure on crude prices over the coming months.

Macquarie economist Marcus Garvey remarked that a combination of lower prices, potential supply disruptions or Opec policy shifts will ultimately be needed to stabilise the market. The investment firm estimates crude could fall as low as 57 dollars per barrel in the first quarter of next year. This would place global oil prices well under the peaks seen in 2022, which soared above 127 dollars per barrel in the wake of the war in Ukraine.

The number of factors converging points towards an extended period of relatively cheap oil. The International Energy Agency recently predicted a record supply glut in the year ahead, with production outstripping demand by as much as 3330000 barrels a day. A significant portion of this is attributed to weaker than expected consumption in markets such as China, India and Brazil.

The sharp decrease in oil prices typically filters through to lower petrol prices at the forecourt, providing much needed relief for motorists who have faced inflated costs at the pump. Only recently, petrol retailers were criticised by the Competition and Markets Authority for unjustified increases in profit margins, raising concerns among drivers over fair pricing practices.

The recent 11 percent annual drop in Brent crude prices, coupled with ongoing uncertainty about future Opec production decisions, indicates a new normal may be emerging in the energy sector. Marcus Garvey at Macquarie suggests that unless there is a decisive move to restrict supply, the oil market could remain in a lower for longer environment, spelling good news for drivers but new challenges for producers and the broader energy industry.