Portland Pricing’s commercial bulk diesel index highlighted a 3% rise in prices across June, increasing by 3ppl to close the month at 108ppl, alongside a drop in the price of HVO during the middle of the period before a rally as June closed.
Supply constraints led by Saudi Arabia’s pledge during the OPEC meeting on 5 June to cut output by an additional million barrels per day counteracted an uncertain economic and geopolitical outlook in June, with China’s economic recovery faltering and the Wagner Group briefly rebelling against Russia.
Persistent interest rate hikes from major central banks instilled fear in the market over a looming recession, dampening the demand outlook as the Bank of England raised interest rates by 50bps to 5%. That was above market expectations of a 25bps hike.
The UK’s monetary policy tightening reflects that of the global economy, as major banks around the world increased interest rates.
The Organisation for Economic Co-operation and Development claimed that the UK inflation rate will be the highest of any major developed economy this year, averaging 6.9%. That caused sterling to decline to US$1.24 in the first week of June
However, data revealed that the UK unemployment rate fell to 3.8% between February and April, and that the economy expanded by 0.2% in April, restoring optimism that Britain will avoid a recession. Although sterling appreciated to its strongest rate since April 2022, the 8.7% inflation rate far exceeded the 2% target.
After falling across four consecutive months, the cost of biofuels also increased in June, contributing to the rise in the price of commercial bulk diesel. The price of fatty acid methyl ester, the key price index used to reflect the cost of blending biofuels in the UK, increased by 22% across June, trading at US$200 per tonne.
In terms of the impact on commercial diesel prices in the UK, the cost to blend biodiesel to the UK standard B7 specification of 7% increased by over 1ppl in June to above 3ppl by month-end, the first monthly increase since February.
Despite the price of renewable diesel (HVO) decreasing significantly to 130ppl by mid-month, HVO reversed some losses and rose to 136ppl by the end of June. This means that the premium for renewable diesel over traditional fossil diesel sits at just below 30ppl at the time of writing.
Although Portland’s wholesale HVO index showed a marginal decline throughout June, this was offset by a drop in the price of Renewable Transport Fuels Certificates, resulting in a higher price for HVO users in the UK.
Portland Pricing is a specialist provider of transparent, independent fuel price information, covering both traditional and alternative fuels. For more information, visit its website.
