International oil prices in July fell at the start of the month, but recovered steadily as the effects of increased production from major suppliers were tempered by an uncertain forward supply picture.

UK transport fuels edged higher from July and Ice Brent futures ended the month at $74.97/bl after falling as low as $72.16/bl.

US President Trump’s aggressive diplomacy towards Iran and China helped to underpin the gains.

The market shrugged off threats by Iran to close oil shipments through the straits of Hormuz in the Persian Gulf, which account for more than 20% of global oil flows. The threat was seen as unrealistic, even though it prompted typically robust rhetoric from the White House. The IMF also expressed alarm at the US imposition of tariffs on its major trading partners, particularly China, arguing it could knock 0.5% off global economic growth.

Global supply has been propped up by increased output in the last two months from the world’s biggest three suppliers: Russia, the US and Saudi Arabia. But continued chaos in Libya and Venezuela and sanctions against Iran could yet make it increasingly difficult to ensure adequate supply going forward. Venezuelan output fell to its lowest in 70 years in June, and Libyan exports have been subject to delays and cancellation.

UK motorists saw gasoline prices little changed on the month, but may have to face further increases to catch up with gains on the Rotterdam spot market that took international prices to their highest point since the end of May. Diesel remains strong and edged higher in July on domestic and international markets, buoyed by demand from the commercial sector. Europe continues to rely heavily on imports from Asia and the US to keep markets balanced.

Gasoline demand from Europe to the US should start to fall as the summer season ends, offering some potential respite for UK consumers. But this seasonality is unlikely to be extended to diesel markets, which are being driven by stronger economic activity across Europe and the US, which grew its GDP by 4.1% in the second quarter the fastest rate of growth for nearly four years.

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