In January, wholesale UK diesel prices rose from 38.79ppl (excluding duty) to 46.22ppl. That largely tracked the underlying Brent crude benchmark which posted significant gains during the month amid persistent supply concerns and geopolitical risks.
In early January, oil prices were pressured by expectations of increased Venezuelan supply, yet found support from renewed United States enforcement actions against Venezuelan tankers and rising tensions after Iran shut its internet amid anti-government protests.
Additionally, escalating US–Iran tensions, including cancelled diplomatic meetings and military advisories in the Gulf, supported oil prices as markets priced in potential Middle East supply disruptions.
In the third week, civil unrest in Iran eased, but renewed supply concerns emerged from temporary shutdowns in Kazakhstan after the Tengiz 900,000 barrels per day (BPD) oilfield declared force majeure following a fire at a power generation facility.
Meanwhile, tightening Venezuelan exports provided additional price support, even as the International Energy Agency maintained that global supply would still exceed demand.
A late-month winter storm in the US reduced output by an estimated two million BPD (15% of national production), while continued geopolitical threats, particularly potential action against Iran, pushed prices higher.
Overall, oil prices registered a strong monthly advance, driven by geopolitical risk repricing and episodic supply disruptions despite ongoing concerns about surplus inventories and demand headwinds, causing wholesale UK diesel prices to gain over 7ppl across the month.
GBP appreciated from US$1.350 to US$1.372 throughout January, not far from its highest level since October 2021. Early in the month, the dollar found support from safe haven flows amid escalating geopolitical tensions.
However, the dollar weakened after President Trump threatened higher tariffs on South Korean goods, following similar warnings to Canada and Europe. It also slid after Trump said he was comfortable with its recent decline, amid government shutdown concerns, a soft consumer confidence report, and ongoing policy uncertainty in Washington.
In the UK, economic data showed mortgage approvals falling slightly but less than expected, while consumer borrowing surged to a two-year high. Investors remained optimistic that the UK economy will record growth in 2026, following a year of flatlining.
Additionally, data revealed that GDP unexpectedly expanded by 0.3% in November 2025 after struggling to recover in the weeks after Chancellor Rachel Reeves’ autumn budget. Unemployment held at 5.1% in the three months to November, annual wage growth slowed to 4.5% (its weakest since April 2022), and inflation unexpectedly rose to 3.4% in December.
Further data from the British Retail Consortium revealed that shop prices rose 1.5% year-on-year in January, limiting the scope for the Bank of England (BoE) to cut interest rates.
BoE duly held interest rates on 5 February, with a slim majority of investors forecasting a cut in March. The US Federal Reserve held interest rates steady at 3.5%-3.75% in its first 2026 policy meeting, resisting pressure from Trump.
Finally, Trump’s threat to impose escalating tariffs on European countries over refusal to agree to a US purchase of Greenland shook markets, raising risks of a broader transatlantic economic dispute. However, Ms Reeves dismissed US tariff threats, insisting that Britain will not be “buffeted around”.
Wholesale UK renewable diesel (HVO) prices fell sharply across the month, from 154.39ppl (excluding duty and Renewable Transport Fuel Certificate (RTFC) benefit) to 134.06ppl, causing the differential versus wholesale diesel to narrow.
HVO premiums spiked towards the end of 2025, partly due to obligated fuel blenders rushing to meet EU Renewable Energy Directive (RED) compliance targets at year-end, and stabilised in January as those compliance pressures eased.
Additionally, physical blending activity slowed at the beginning of the new compliance year, and waste-based feedstock markets were subdued with limited buying interest. HVO prices also fell as proposed amendments to Germany’s new biofuel laws caused fresh uncertainty over EU supply-demand balance for this year.
The Bundesrat proposed amendments that would increase the 2027 obligation level, permit sustainable aviation fuel to fulfil up to half the obligation, raise the cap on crop-based fuels, and move up the requirement for plants to undergo on-site inspections by one year to 2026.
Looking ahead, after the enforcement of RED III last year, 2026 will be a transition year as higher targets are expected to lift overall biofuels demand. Tougher European targets are forecast to continue attracting supply from the US, Canada and China, supporting price premiums for HVO in 2026.
Finally, the cost of blending biodiesel to UK B7 specification declined to 7.5ppl, decreasing the cost of meeting the Renewable Transport Fuel Obligation (RTFO) amid rising exports of used cooking oil into the US from Asia and Europe.
Meanwhile, the price of RTFCs declined from 28.5p per certificate (ppc) at the beginning of January to 26.4ppc by close, reducing the benefit that HVO consumers receive (assuming that 100% of the RTFC benefit is passed to the end-user).
