The price of unleaded petrol and diesel at the pumps fell for the first time in four months in November, according to the latest data from RAC Fuel Watch.
The reduction was a result of retailers passing on lower wholesale prices, which reflected the lower cost of oil, but the RAC is warning drivers to expect price increases at the pumps before Christmas.
During November the average price of unleaded petrol was down 2.89ppl to 113.96ppl and diesel was down 2.4ppl to 116.37ppl.
But the RAC predicted price rises through December as a result of the cut in oil production announced on the last day of November by OPEC, the Organisation of the Petroleum Exporting Countries.
The market reacted instantly with the price of a physical barrel of Brent crude closing trading up 7% at $49.09 on 30 November and up a further $3.40on the first day of December to $52.49.
RAC fuel spokesman Simon Williams said: “While November was a good month for fuel prices with the first reduction for four months, it looks as though motorists are about to have an unwelcome early Christmas present in the form of higher prices at the pump. This is a big change from the last two Decembers when drivers benefited from falling fuel prices.
“Given retailers were relatively slow to pass on wholesale price savings to motorists last month, despite the RAC’s calls for a cut, we will be monitoring closely to see if forecourt prices now rocket as a result of the recent leap in the price of oil.
“The medium-term outlook for prices is, however, much harder to predict. OPEC has not cut supply for eight years and since mid-2014 has been actively operating an oversupply strategy to keep the barrel price low, to make it unviable for the United States to produce oil from fracking. This week’s production cut appears to be a move away from that and unusually is supported by Russia, which is not a member of OPEC.
“What happens to the oil price in the next few weeks as the markets react will be crucial and could set the tone for what happens to prices early into 2017.
“If the US now responds by increasing its output, prices may not rise as sharply as some are predicting. It is also important to remember that the OPEC cut is currently only in force for six months.
“Drivers should remember that while the oil price is the biggest variable affecting fuel prices, it is not the only one. With fuel traded in dollars, the dollar/sterling exchange rate also has a bearing on what retailers pay, and in turn what we pay when we fill up. A weaker pound, as we have seen since the EU vote, can see forecourt prices rise but a stronger pound can do the reverse. The unprecedented political situation on both sides of the Atlantic has the potential to buffet the exchange rate significantly through next year.”