Fuel Prices in Ukraine May Fall in July as Oil Prices Decline

The Ukrainian fuel market is entering July with a noticeable reserve for price reductions. Global oil has fallen sharply after tensions around the Strait of Hormuz decreased, the wholesale segment in Ukraine has already reacted with a decline, and retail chains have gradually begun to revise prices on fuel station boards. For drivers, this means one thing: petrol, diesel and autogas may cost less in July than at the end of June. But this movement will not be the same for all types of fuel. Diesel will depend not only on oil quotations, but also on the harvest season, logistics and weather conditions. Petrol will become cheaper more cautiously. Autogas has a separate dynamic it is being pushed down by a surplus on the market and weaker seasonal demand. Time for Action analyzed why fuel prices in Ukraine began to decline, what factors will influence the market in July and why the current price drop does not yet mean a stable long-term decline.

Oil Has Lost Part of Its Geopolitical Premium

The key reason for cheaper fuel is the fall in global oil prices. At the end of last week, quotations went down as tankers continued to pass through the Strait of Hormuz, while traders’ fears about a possible supply shortage began to weaken. Before the agreement between the United States and Iran on a 60-day ceasefire, the market was living with the expectation of possible escalation. The Strait of Hormuz is critically important for global energy flows, so any risks to shipping are immediately built into the oil price. When traders see the threat of a shortage, the price rises. When the risk retreats, quotations quickly correct downward.

As of Friday evening, June 26, August Brent futures had fallen by 4.24% from the start of trading to $71.99 per barrel. U.S. WTI declined by 3.74% to $69.23 per barrel. Over the week, Brent lost 10.86%, while WTI lost 9.62%. This is a significant drop, because earlier the market reacted to risks with sharp jumps. Last week, oil prices briefly rose after an attack on a cargo vessel near Oman. At that time, the relevant UN agency suspended its voluntary evacuation program, while U.S. officials said that Iran carried out the shelling. Tehran, in turn, reported that it did not guarantee the safety of vessels that deviated from the designated Hormuz routes. That is, the market remains sensitive to any signals from the region. But the main change has already happened: the fear of an immediate supply shortage has weakened, and oil has lost part of the markup that the price received because of geopolitical risks.

The Wholesale Fuel Market in Ukraine Has Already Reacted

Global quotations do not immediately pass into prices at fuel stations. The wholesale segment reacts first, and it is there that the decline is already clearly visible.According to the consulting company Naftorynok, diesel in wholesale mostly became cheaper during the past week. As of June 26, the average wholesale price of diesel fuel compared with June 19 decreased by UAH 1.3 per liter to UAH 63.77 per liter. At the same time, compared with June 24, diesel in wholesale became more expensive by 28 kopiykas per liter, which shows that the market does not move in a straight line, but reacts to daily changes in quotations, currency and demand.Additional pressure on diesel is created by the correction of gasoil the main raw material for diesel fuel production. On the London exchange, gasoil futures became cheaper by $16.40 per ton to $898.25 per ton.At the same time, for the Ukrainian market, not only the fall in oil or gasoil matters, but also the exchange rate. According to the NBU, the dollar rose by 4 kopiykas to UAH 44.92, while the euro added 19 kopiykas to UAH 50.92. This matters because import contracts are concluded in dollars, while excise duties at the border are paid in euros. That is, the currency factor may partially eat up the effect of cheaper raw materials.

Petrol in wholesale also became cheaper. The average wholesale price of A-95 as of June 26 compared with June 19 decreased by UAH 1.55 per liter to UAH 69.27 per liter. At the same time, compared with June 24, the wholesale price of petrol rose by 13 kopiykas per liter. This again demonstrates instability over short periods: the general movement is downward, but small rebounds are possible within the week.On the European market, petrol indicators, on the contrary, showed growth. A-95 quotations on the northwestern European Eurobob basis on June 25 increased by $36 per ton to $936–977 per ton. The Mediterranean FOB Med indicator rose by $37 per ton to $927 per ton.This is an important detail: Ukrainian prices depend not only on oil itself, but also on finished petroleum products, the exchange rate, logistics and the behavior of suppliers. That is why retail may react more slowly than it seems after news about the fall of Brent or WTI.

Fuel Stations Are Already Lowering Prices, But Unevenly

In the retail segment, the decline has already begun. During the period of June 24–26, fuel at stations continued to become cheaper, although the greatest activity was in the diesel segment. As of June 26, compared with June 19, the average price of A-95 petrol decreased by 68 kopiykas per liter to UAH 68.79 per liter. The average price of diesel fuel fell much more noticeably by UAH 1.66 per liter, to UAH 74.68 per liter. This is logical: the diesel segment is now reacting more actively to wholesale price reductions, but at the same time it is the segment with the greatest risks in July and at the beginning of August. Demand for diesel traditionally rises during the harvest season, and any logistics problems can quickly reverse the price movement.

Large chains reduced prices synchronously, but cautiously. WOG, OKKO, SOCAR and KLO lowered the cost of diesel fuel and premium diesel by about UAH 1 per liter. Ukrnafta revised the premium segment more actively and reduced premium diesel by UAH 2.50 per liter. Among regional operators, the movement was sharper. Marshal lowered prices for diesel fuel and premium diesel by UAH 2 per liter, Kvorum by UAH 4 per liter, ZOG by UAH 7 per liter. Grand Petrol adjusted the cost of the main types of fuel downward by UAH 5 per liter over the weekend. At the same time, not all operators moved in one direction: after the end of the promotional price reduction, Neftek returned the cost of diesel fuel and premium diesel to the previous level, which meant an increase of UAH 1 per liter. This difference shows that the average market price does not always reflect the situation at a specific fuel station. National chains usually move more cautiously, while regional ones may reduce prices faster in order to retain customers or compete more actively for sales volumes.

Petrol and Diesel May Become Cheaper by Another UAH 4–5 per Liter

The most important practical forecast concerns July. According to Dmytro Lyoushkin, founder of the Prime group of companies, prices will continue to decline this week. At current oil prices, the cost of diesel fuel at large OKKO and WOG stations should be around UAH 75 per liter, while A-95 petrol should be UAH 73 per liter. During July, petrol and diesel may become cheaper by another UAH 4–5 per liter. The decline is likely to be gradual in steps of UAH 1–2 per liter. Such a scenario looks realistic, because retail usually does not lower prices all at once after oil. Chains take into account fuel stocks purchased earlier at higher prices, competition, demand, logistics and currency risks.

However, this forecast has an important caveat. If July is hot, the Danube may become shallow. This could complicate the maritime logistics of fuel in the South and East of the country. In that case, closer to August, when the harvest season will be underway in Ukraine, diesel may become more expensive by about UAH 2 per liter. This is one of the key risks for the market. Diesel is not just fuel for private cars. It is a resource for the agricultural sector, transport, logistics and part of industry. When the active season of field work begins, demand for it increases. If logistics become more complicated during the same period, the market quickly receives grounds for a new increase. Therefore, the July decline in diesel prices should not be perceived as a guaranteed long trend. Rather, it is a window of lower prices that may last as long as global oil remains cheaper, logistics work without serious disruptions, and demand does not create additional pressure.

Autogas Is Becoming Cheaper Because of Surplus

The situation with autogas differs from petrol and diesel. Here, the main factor is not only global oil, but an excess of supply on the domestic market. According to Naftorynok, as of June 26 compared with June 24, the average wholesale price of LPG with delivery across Ukraine decreased by UAH 1,350 per ton to UAH 66,051 per ton. One of the main drivers of the fall was Poltava Gaztrade, which reduced prices for its resource by UAH 1,950–2,050 per ton to UAH 63,850–67,100 per ton depending on the region. The price of gas for self-pickup also decreased by UAH 1,160 per ton, to UAH 63,377 per ton. In the Central and Western regions, mixtures from Centurion Group, Poltava Gaztrade, Bars, Gaztron Ukraine, TD DMS Trade and RLS were offered at UAH 62,300–65,500 per ton. This is UAH 1,000–2,500 per ton cheaper than on Wednesday. In Kyiv region, TD DMS Trade reduced the price of propane by UAH 1,100 per ton to UAH 68,000 per ton, while Gaztron Ukraine lowered the cost of butane by UAH 1,500 per ton to UAH 62,500 per ton.

Retail also reacted quickly. As of the evening of June 26, compared with June 19, the average price of propane-butane at fuel stations decreased by UAH 1.26 per liter to UAH 40.77 per liter. Regional operators adjusted prices most actively. Grand Petrol reduced LPG by UAH 2 per liter, Stels by UAH 2.60 per liter. National chains moved more cautiously. According to Mykhailo Shuban, founder of the Sintonec LPG liquefied gas trading system, the autogas market is now in stagnation. There is seasonal growth in consumption, but it is weaker than in similar periods of previous years. Because of the significant surplus and lower quotations, gas in wholesale may become cheaper this week by another UAH 2,000–3,000 per ton, and at fuel stations by UAH 1–2 per liter. The decline may continue throughout July. But there is a limit here as well: the fall will last until global quotations begin to rise because of the seasonal increase in consumption in the EU.

What This Means for Consumers

For Ukrainian drivers, July may become a month of more noticeable fuel price reductions. Diesel and autogas have the best chances of further decline, although their reasons are different. Diesel is reacting to oil, the wholesale market and the overall correction. Autogas is becoming cheaper because of surplus and weaker demand dynamics. Petrol also has room to fall, but its movement may be more cautious. The retail price will be affected not only by oil quotations, but also by prices for finished petroleum products in Europe, the exchange rate, the tax component, logistics and the policy of specific chains. The main conclusion for the market is that the current decline is not an automatic guarantee of a long cheap period. It became possible because of the reduction of geopolitical pressure on oil and the reaction of the wholesale segment. But the Ukrainian fuel market remains vulnerable to external and internal factors. If the Strait of Hormuz continues to operate without serious disruptions, and global quotations do not return to growth, retail will have grounds for further reductions. But if logistics problems, heat, the shallowing of the Danube or a seasonal jump in diesel demand during the harvest are added, part of this price decline may quickly disappear.

The fuel market is now moving downward, but this movement rests on a fragile balance. Oil has become cheaper, wholesale has already reacted, and fuel stations are gradually adjusting prices. But July will show what proves stronger cheaper raw materials or Ukrainian seasonal risks that may once again raise the cost of fuel.

Tags: autogas, diesel, fuel market, fuel stations, harvest season, oil, petrol, Strait of Hormuz

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