The prices of petrol and diesel in the UAE will drop next month, it has been announced.

Prices increased in September and October, then fell in November and December, reflecting the trend in the global oil market.

How much will fuel cost in January?

The breakdown in fuel price a litre for January is as follows:

• Super 98: Dh2.82, from Dh2.96 in December (down by 4.7 per cent)

• Special 95: Dh2.71, from Dh2.85 in December (down by 4.9 per cent)

• Diesel: Dh3, from Dh3.19 in December (down by 5.9 per cent)

• E-plus 91: Dh2.64, from Dh2.77 in December (down by 4.6 per cent)

The UAE liberalised fuel prices in 2015 to allow them to move in line with the market. In 2020, prices were frozen by the fuel price committee after the start of the coronavirus pandemic.

The controls were removed in March 2021 to reflect the movement of the market once again.

Oil prices, which rose to about $98 in September, are on track for a back-to-back monthly loss amid expectations of a tight crude market in the fourth quarter.

But higher oil production in Iran and the easing of sanctions on Venezuela could ease supply concerns next year.

Oil prices, which endured another roller coaster ride in 2023, posted their biggest annual drop since 2020 amid persistent concerns about lower demand as well as geopolitical and economic uncertainties.

Brent, the global benchmark for two thirds of the world's oil, lost 0.14 per cent to settle at $77.04 per barrel on Friday, the last trading day of the year. West Texas Intermediate, the gauge that tracks US crude, declined 0.17 per cent to finish at $71.65 a barrel.

Both benchmarks shed more than 10 per cent, or about $8.60, from a year ago – Brent ended 2022 at $85.62 per barrel, while WTI settled at $80.26 – ending two years of gains.

Demand growth in 2023 was also hit hard by expectations of an economic slump as central banks around the world tightened monetary policy to tame inflation.

Sentiment in the oil industry turned “decidedly bearish” in November and early December as non-Opec+ supply strength coincided with slowing global oil demand growth, according to the International Energy Agency.

The Israel-Gaza war, which started in early October, initially pushed prices up, although crude soon shed those gains on demand concerns.

Last week, prices increased on supply concerns after attacks by Houthi rebels in the Red Sea – a major waterway for global trade – forcing shipping companies to reroute their vessels.

The slowdown in oil demand is expected to continue in 2024, as GDP growth stays below trends in major economies, in addition to a steadily growing electric vehicle industry, analysts at MUFG said.

Prices are also being affected by worries of slow demand growth in the US and China, the world's biggest consumers of crude.

On the supply side, the Opec+ oil producers group will continue cuts next year as it seeks to better balance the market.

The oil group's members, led by Saudi Arabia and Russia, in November, extended their voluntary oil output reductions until the end of the first quarter of 2024 amid concerns over future fuel demand.

The kingdom, the world's largest oil exporter, will keep its voluntary output cut of one million barrels per day until the end of March, while Russia is expected to deepen its cut to 500,000 bpd and extend it until the end of the first quarter of 2024.

In total, the group revealed supply reductions of almost 2.2 million bpd for the first quarter.