Oil's biggest fall in three months: will diesel prices follow?

Oil had its biggest one-day fall in three months on Monday. Brent crude, the global benchmark, dropped 7.6% to close at $104.77 a barrel after Washington and Tehran both signalled they were open to talks on ending the war that has disrupted Middle East oil supplies.

At UK forecourts, prices were already edging down before Monday's fall. FuelWise's figures from the government's Fuel Finder data put the average price of regular unleaded (E10) at 171.4p a litre this morning, 1.4p lower than a week ago and 3.2p lower than 30 days ago. Diesel is falling far more slowly: the average is 198.4p, down only 0.4p in a week and 1.6p in a month.

The question for drivers is whether Monday's drop in oil will make that pace any quicker, and whether it will last.

What happened to oil on Monday

According to Bloomberg, reported by Rigzone, prices fell after Iran's state news agency IRNA reported that the country's supreme leader had approved the government pursuing negotiations. This came on top of reports that US President Donald Trump had told Israeli Prime Minister Benjamin Netanyahu he wanted to let talks with Iran play out. US crude (WTI) fell 7.4% to settle at $96.46, back below $100.

Earlier in the day, Reuters reported that Iranian officials had held talks with Qatari mediators and that a draft proposal was being circulated, with a follow-up meeting possible. Iran's foreign minister, Abbas Araqchi, said on Sunday that Tehran was prepared for "both defence and diplomacy".

Monday's fall reversed some of October's rally. Reuters noted that Brent ended October at its highest level in six months, amid concern that the conflict could escalate again after today's US midterm elections. Asked whether he would resume strikes on Iran after the vote, Mr Trump said "no", according to the press pool travelling with him, as reported by Bloomberg.

Why the fall may not hold

Nothing has been settled yet. Bloomberg reported that the two sides have not agreed terms for fully reopening the Strait of Hormuz, the world's most important energy chokepoint, and that traders remain wary of diplomacy that starts and stops without producing peace. Reuters reported a recent rise in attacks on oil tankers passing through the strait, along with Houthi attacks on Saudi energy sites.

Stocks are also low. The chief executive of Abu Dhabi's state oil company ADNOC said the world has drawn nearly 1 billion barrels from inventories since the war disrupted shipping through Hormuz, according to Reuters. Goldman Sachs raised its oil price forecasts on Sunday. The bank said Brent could reach $140 in 2027 if Gulf output stays 3.5 million barrels a day below its 2025 average.

Diesel faces extra pressure. Bloomberg said that escalating Ukrainian attacks on Russian refineries, as well as tighter Gulf supplies, have pushed fuel prices higher in recent months. On Monday, Kazakhstan temporarily stopped sending crude to Russia through the Atyrau-Samara pipeline after a drone strike.

The pound and the Bank of England

Oil is priced in dollars, so the exchange rate affects what UK retailers pay. Reuters reported that sterling was steady on Monday at about $1.34. Investors are expecting the Bank of England to raise interest rates on Thursday, which would be its first rise since August 2023. ING economists quoted by Reuters expect inflation to rise above 4% early next year, from 3.5% now, with energy costs driving much of the increase.

What FuelWise's figures show at the pumps

Retailers are cutting prices, though mostly by small amounts. In the 24 hours to this morning, Fuel Finder recorded 2,458 price changes at 1,864 forecourts. Of those, 2,232 were cuts and 226 were rises. Over the past seven days there were 9,732 cuts and 983 rises across 5,276 forecourts.

Petrol prices are coming down faster than diesel prices:

• E10 unleaded: 171.4p average, down 1.4p in a week (petrol prices)
• Diesel: 198.4p average, down 0.4p in a week (diesel prices)
• Super unleaded (E5): 188.4p average, down 2.3p in a week
• Premium diesel: 217.2p average, down 1.1p in a week

Diesel now costs about 27p a litre more than E10 on average. Diesel has also lagged in the regions. In Northern Ireland, the average diesel price is unchanged on the week at 190.9p, while E10 there fell 1.2p. In other regions, diesel fell by between 0.3p and 0.5p in the week, while E10 fell by between 1.1p and 1.6p.

In August, the Competition and Markets Authority said it was concerned that some retailers had been slow to pass on falls in wholesale diesel costs. It said it would launch a detailed review in the autumn. CMA chief executive Sarah Cardell said the watchdog expects "any reductions in wholesale prices to be rapidly and fully passed on to drivers."

Where to find cheaper fuel

Prices vary much more between types of forecourt than they have moved this week:

• Supermarkets average 169.1p for E10 and 195.6p for diesel. Other non-motorway forecourts average 171.8p and 199.1p, so supermarkets are about 2.7p cheaper for petrol and 3.5p cheaper for diesel.
• Motorway services average 191.1p for E10 and 216.5p for diesel, about 22p a litre more than supermarkets for petrol.
• Northern Ireland is the cheapest region, at 163.7p for E10 and 190.9p for diesel (Northern Ireland fuel prices). In Great Britain, the North East (169.7p) and Yorkshire and the Humber (170.2p) have the lowest average E10 prices. The South East is the dearest region, at 173.1p for E10 and 200.1p for diesel (South East fuel prices).
• Brands: among the larger chains, Asda and Morrisons average 169.4p for E10 and Tesco averages 195.3p for diesel (Tesco fuel prices). Shell (174.3p) and BP (173.8p) have the highest average E10 prices of the big brands.

The cheapest E10 in the country today is 153.9p and the cheapest diesel is 174.9p. Both are well below the averages, so it pays to check local prices on the live fuel price map before setting off.

What it means for drivers this week

Monday's fall in oil is good news for drivers, but it comes from hopes of a deal rather than a deal itself, and analysts quoted by Reuters and Bloomberg warn that prices could rise again. Petrol is already falling steadily at the pumps. Diesel is the price to watch, to see whether lower oil and wholesale costs reach forecourts. On average, supermarket diesel is already 3.5p a litre cheaper than diesel at other forecourts. That is more than the national average has fallen over the past month.