• Analysis
Oil prices fall as UK petrol prices drop 5p a litre since early October
Oil prices fall to their lowest level since late August, and the relief is reaching UK forecourts: the AA said on Monday that petrol is down 5p a litre since early October to 169.7p, with another 10p cut indicated.
Petrol down 5p since early October, more to come
UK drivers are the clearest winners so far from oil prices fall. The motoring organisation said on Monday that the average UK petrol price has dropped 5p a litre since early October, standing at 169.7p a litre.
According to the AA, wholesale markets suggest the easing has further to run:
- •A further 10p reduction in pump prices should be on the way.
The wholesale signal means households filling up over the coming weeks could see the current decline continue well beyond the 5p already taken off since early October [F15, F16].
Brent crude at lowest since 31 August
The pump-price relief traces back to the wholesale benchmark. Brent crude, the global oil benchmark, fell nearly 3% to $89.66 on Tuesday morning, its lowest level since 31 August. That drop came on top of a near 6% fall on Monday, which markets put down to signs the Iran conflict might be nearing an end.
The driving force was a comment from the US president, who downplayed the need for military action against Iran at this point and said Israel and Gulf allies were well protected from any escalation [F4, F5]. Speaking at a White House press conference, Donald Trump said: "At this point, taking the military action doesn't seem to be a very necessary thing – but we're locked and loaded, ready to go for any reason."
Markets climb as BP and Shell lag
Relief over cheaper crude lifted equities. Europe's Stoxx 600 gained 0.9% to 662.54, hovering near the record high it hit in early August, on hopes of a Middle East peace deal. The FTSE 100 climbed 45 points, or 0.4%, to 10,828.
Not every share joined the rally. BP and Shell were the index's biggest losers, down 1.7% and 1.5% respectively, while lower fuel costs sent Lufthansa shares 1.8% higher and Air France-KLM up 1.2%.
Fed inflation data in focus
Analysts cautioned that the recovery rests on more than oil. Daniela Hathorn, senior market analyst at Capital.com, said global markets were extending their recovery, supported by the sharp decline in oil prices and renewed technology buying.
She added that lower energy prices could help ease inflation expectations, but that the underlying macroeconomic and corporate risks remain unresolved, and the US Federal Reserve needs broader evidence of slowing inflation before changing policy. October US inflation data is due at 1.30pm GMT.
With technology valuations still sensitive to yields, another inflation surprise could quickly bring volatility back into focus
That warning on yields came from Hathorn, and the data release at 1.30pm GMT is the next marker for the Federal Reserve.
