Crude Surges Over 7% in Volatile Week as Hormuz Fears Trump Demand Worries 

Mumbai, Sept 5: A week of stark contrasts unfolded in global energy markets as crude oil prices staged a dramatic recovery, erasing earlier losses to post their strongest weekly gain since July. The week ending 4 September saw Brent crude surging past $95 per barrel and West Texas Intermediate (WTI) climbing towards $92, as geopolitical tensions surrounding the Strait of Hormuz overwhelmed concerns over weakening demand fundamentals. Domestic fuel prices, however, remained frozen at pumps across India, with petrol and diesel rates holding steady for the third consecutive month despite the sharp rally in international benchmarks. 

Brent Jumps 7% to $95.52 as Hormuz Reopening Hopes Fade 

The most significant development of the week unfolded as oil prices reversed early losses to post a robust weekly gain. Brent crude futures were trading above $95.52 a barrel by 4 September, having gained more than 7% during the week, heading towards its strongest weekly performance since July. WTI crude was trading close to $92 a barrel, marking a weekly rise of over 10%. 

The week opened on a softer note, with Brent crude falling 0.7% to $87.24 a barrel on 27 August, while WTI declined 0.7% to $81.67. ICE Brent October 2026 settled at $89.57 per barrel on 27 August, up 1.93% on the day, while NYMEX WTI October 2026 closed at $83.53 per barrel, gaining 1.56%. WTI was at $81.873 per barrel, down 0.43%, and Brent at $87.477 per barrel, down 0.41% on 27 August. 

The trigger for the sharp reversal was two-fold. Early in the week, oil prices extended losses for a fourth session as Iran-Oman talks eased supply concerns, with US President Donald Trump stating that 10 million barrels of oil had passed through the Strait of Hormuz on Tuesday. However, by mid-week, Brent crude futures fell 50 cents, or 0.6%, to $89 a barrel, while WTI declined 42 cents, or 0.50%, to $83, as markets began pricing in renewed supply risks.  

The United States announced that there are no current negotiations with Iran, while geopolitical tensions ramped up following a warning issued by Russia to Britain. By the close of the week, Brent was on track to lose 5.3% for the week, while WTI was set to fall 4.3% before the sharp recovery. 

Backwardation Deepens as Front-End Brent Trades $6-7 Above 2030 Strip 

The crude futures curve told a compelling story of market expectations. ICE Brent October 2026 settled at USD 89.57/bbl on 27 August, trading roughly USD 6-7 above the long-dated 2030 strip. The curve shows pronounced backwardation: front 2026 contracts near USD 85-90/bbl slide steadily toward about USD 71/bbl by mid-2030 and below USD 69/bbl by 2034-2035. NYMEX WTI October 2026 showed a similarly steep downward slope from high USD 70s in early 2027 to mid-USD 50s by 2035. 

This steep backwardation confirmed a broad market view of near-term tightness but comfortable longer-term balances. The front-end strength was driven by ongoing supply risk in the Middle East and constrained flows through the Strait of Hormuz.  

Also Read: How to invest in crude oil 

While markets weighed prospects for partial reopening, pricing still embeds a meaningful risk premium after months of war-related disruptions. OPEC+ has been gradually restoring barrels, with the September increase of 188,000 barrels per day reinforcing expectations that more barrels can reach the market. EIA data for the week ending 28 August showed US commercial crude oil inventories declining by 4.45 million barrels, a second consecutive week of unexpected draws. 

US Crude Inventories Drop 4.45 Million Barrels as Cushing Hits Decade Low 

Fundamental data provided strong support for the bullish sentiment. Latest EIA weekly data showed US commercial crude oil inventories decreasing by 4.45 million barrels for the week ending 28 August, marking a second consecutive week of unexpected draws. Gasoline inventories simultaneously decreased by 1.17 million barrels. 

The inventory picture was further tightened by critically low storage levels at the key delivery hub. US Cushing crude oil fell to approximately 20 million barrels, the lowest operating level since October 2014. US Strategic Petroleum Reserve crude oil dropped to its lowest level since 1983. These supply constraints, combined with ongoing geopolitical risks, underpinned the sharp rally in prices through the latter half of the week. 

MCX Crude Futures Decline to ₹7,954 as Rupee Weakness Caps Gains 

On the domestic front, the Multi Commodity Exchange (MCX) reflected the volatility in global markets, though with some lag. MCX crude oil futures for September 2026 delivery declined 0.18% to trade at ₹7,954 per barrel on 28 August. Earlier in the month, MCX crude oil for August delivery had traded higher by ₹116, or 1.52%, at ₹7,761 per barrel. 

The modest decline in domestic futures despite the global rally was attributed to rupee-dollar exchange rate movements, which partially offset the impact of rising international prices. The rupee weakened against the US dollar during the week, making imports more expensive in rupee terms, yet the impact on futures pricing was muted as markets factored in the sustained freeze on retail fuel prices. 

Petrol and Diesel Prices Hold Steady for Third Month Despite Crude Rally  

Perhaps the most striking aspect of the week was the complete decoupling of domestic retail fuel prices from international crude benchmarks. Petrol and diesel prices across India remained unchanged on 27 August, even though the Strait of Hormuz is still far from normal. State-run oil marketing companies kept petrol and diesel prices unchanged across India on Thursday, 27 August 2026. The last significant revision in domestic fuel prices was made on 25 May, when petrol became costlier by ₹2.70 per litre and diesel prices were raised by ₹2.80 per litre. This meant that fuel rates had remained unchanged for nearly three months despite fluctuations in international crude oil markets. 

The sustained freeze was driven by the rupee-dollar exchange rate, refining costs, taxes, dealer margins, and other factors taken into account by state-run oil marketing companies. Domestic fuel prices do not change every day even when Brent and WTI prices remain volatile. Fuel prices are revised every day at 6 am under India’s dynamic pricing system, yet the government and oil marketing companies chose to absorb the impact of rising crude prices rather than pass them on to consumers. 

Delhi Petrol at ₹102.12, Diesel at ₹95.20 as Cities Show Wide Variation 

City-wise fuel prices revealed significant regional variations driven by local taxes, transportation costs, and state-level levies. On 27 August, petrol was priced at ₹102.12 per litre in Delhi, ₹111.21 in Mumbai, ₹113.51 in Kolkata, and ₹107.77 in Chennai. Diesel prices stood at ₹95.20 per litre in Delhi, ₹97.83 in Mumbai, ₹99.82 in Kolkata, and ₹99.55 in Chennai. Hyderabad recorded the highest petrol price at ₹115.69 per litre, while diesel was at ₹103.82. Bengaluru petrol was priced at ₹110.89 per litre and diesel at ₹98.80. 

By 28 August, prices remained unchanged, with New Delhi petrol at ₹102.12 and diesel at ₹95.20. Mumbai petrol at ₹111.21 and diesel at ₹97.83 also held steady. On 29 August, Brent crude was at $89.31 a barrel and WTI at $83.40 a barrel, yet petrol in Delhi remained at ₹102.12 and diesel at ₹95.20. Kolkata petrol at ₹113.51 and Chennai petrol at ₹107.77 showed no movement. 

By 2 September, petrol costs ₹111.21 per litre in Mumbai, ₹113.51 in Kolkata, and ₹107.76 in Chennai. Diesel was priced at ₹97.83 per litre in Mumbai, ₹99.82 in Kolkata, ₹99.55 in Chennai, and ₹99.56 in Bengaluru. On 3 September, petrol in Mumbai was at ₹111.18, Kolkata at ₹113.47, and Chennai at ₹107.77. Diesel in New Delhi remained at ₹95.20, Mumbai at ₹97.83, and Kolkata at ₹99.82. 

By 4 September, the freeze continued. Petrol was priced at ₹102.12 per litre in Delhi, ₹111.21 in Mumbai, ₹113.51 in Kolkata, and ₹107.76 in Chennai. Diesel prices stood at ₹95.20 per litre in Delhi, ₹97.83 in Mumbai, ₹99.82 in Kolkata, and ₹99.55 in Chennai. Hyderabad continued to have relatively high fuel prices, with petrol at ₹115.73 per litre and diesel at ₹103.82. Thiruvananthapuram recorded petrol at ₹115.49 per litre and diesel at ₹104.40. Chandigarh reported one of the lower diesel prices at ₹89.47 per litre, while petrol was at ₹101.54. 

Brent Monthly Average Rises to $88.1 in August as Supply Gap Widens 

The broader monthly picture underscored the upward trajectory in oil prices. Brent and WTI August monthly averages were $88.1 and $82.4 per barrel respectively, rising 4.9% and 4.6% month-on-month. The International Energy Agency forecast global oil supply to decline by approximately 4% in 2026, projecting a global supply gap of about 1.27 million barrels per day. IEA and EIA respectively预计 global oil supply to decrease by 4.3 million barrels per day and 5.3 million barrels per day year-on-year in 2026, with third-quarter supply gaps of 1.8 million and 3.84 million barrels per day respectively. The annual supply-demand gap averaged approximately 1.6 million barrels per day. 

These structural supply deficits, combined with geopolitical risks, suggested that the underlying bullish case for crude remained intact despite the weekly volatility. Analysts expect Brent crude prices to range between $80-95 per barrel in September 2026, with geopolitical disruptions continuing to provide upside support. 

The week’s price action highlighted the persistent influence of geopolitical risk premiums on crude markets, with Brent surging over 7% as Hormuz concerns resurfaced despite weakening demand signals. Domestic fuel prices remained frozen for the third consecutive month, shielding consumers from the impact of rising international benchmarks but raising questions about the sustainability of this policy amid sustained crude strength. Market participants should monitor OPEC+ meeting outcomes on 6 September and developments in US-Iran diplomatic efforts, as these factors will likely determine the trajectory of oil prices in the coming weeks. 

Source 

• https://ppac.gov.in/prices/international-prices-of-crude-oil 
• https://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm