Brent tops $100 as Indian fuel retailers lose Rs 5 a litre on petrol and Rs 23 on diesel

Brent crude crossed $100 a barrel on Wednesday and traded above $101 on Thursday, its first move through that mark since late July. West Texas Intermediate sat near $96. The jump follows Tuesday's US strikes that destroyed five Iranian tankers and Iran's claim that it hit ten ships near the Strait of Hormuz, the largest declared wave of attacks on shipping since the war began in late February.

India's crude basket, a blend weighted 77.81 percent towards sweet grades and 22.19 percent towards sour Oman-Dubai barrels, was put at about $109 by Prashant Vasisht of ICRA and at $108.91 on 8 September by other market data. The September average so far is $102.11, against $90.19 in August and $82.04 in July. Before the war, Brent had been trading around $70 to $75.

State-owned oil marketing companies are selling below cost. Vasisht said marketing margins, measured on the average crude price for September to date, stand at a negative Rs 5 a litre on petrol and a negative Rs 23 a litre on diesel. Under-recoveries on domestic LPG are about Rs 200 a cylinder. Equirus data for the week ended 4 September showed petrol margins at a negative Rs 4.2 a litre, worse than a negative Rs 2 the week before, and diesel at a negative Rs 24.9.

Retail pump prices have not moved in step. The government raised petrol by a cumulative Rs 7.35 a litre and diesel by Rs 7.53 a litre in May, in four instalments. Since then the listed city prices have been broadly static. On Thursday petrol in New Delhi was Rs 102.12 and diesel Rs 95.20. Mumbai was Rs 111.21 and Rs 97.83. Hyderabad petrol was Rs 115.73. Those figures can shift by a few paise on state taxes. They have not tracked a $25 to $30 rise in the marker since February.

Officials told the Financial Express that another retail revision is unlikely unless the Indian basket stays well above $110. Pankaj Srivastava of Rystad Energy noted that past hikes have tended to arrive when the basket averaged around $106. The September average is already close to that line. The political calendar is not. India is days away from hosting BRICS leaders in New Delhi.

The rupee closed at 95.45 against the dollar, down 37 paise and at a one-week low, on the oil move, dollar demand tied to derivative maturities, and corporate hedging. The Sensex still finished 138 points higher at 74,902.59. The Nifty 50 rose 46 points to 23,477.80. Equity traders treated the session as a wait for US inflation numbers and the Federal Reserve meeting next week. Oil traders treated it as a supply story.

India imports close to 90 percent of its crude and about half of its gas. Rajeev Sharan of Brickwork Ratings said the $100 print is being driven by US-Iran risk and Hormuz supply fears rather than a surge in demand. OPEC has held output steady. He expects prices to stay firm and jumpy through the coming month unless the fighting eases. Costlier crude feeds through aviation, paints, tyres, chemicals, logistics and parts of packaged goods.

The war is in its seventh month. Central Command said US forces destroyed five Iranian tankers after Iran twice failed to hit a Navy ship. Iran said it struck ten vessels. Shipping through Hormuz has been the main risk premium in the complex since February. A second choke point is now in play in the Red Sea, where Houthi forces have closed on Mocha and Dhubab above Bab el-Mandeb.

For Indian refiners the arithmetic is simple and ugly. They buy barrels near $109 and sell petrol and diesel at May prices. The longer that gap holds, the larger the working-capital strain on Indian Oil, Bharat Petroleum and Hindustan Petroleum. A second pump hike would close the gap and show up immediately at the retail board. The government has not scheduled one.