Crude oil may fall to $50 by June 2026, easing FY27 inflation, boosting rupee, and growth; here's why
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Crude oil prices are expected to soften significantly in 2026 and could reach $50 per barrel by June of this year, which will positively impact the FY27 inflation, rupee, and growth outlook, according to SBI Research’s latest note. Internal crude oil prices, according to the report, are expected to soften, regardless of recent geopolitical events. “Oil prices in general have remained subdued due to the OPEC+ decision to increase production. The reversal of the strategy and reduction in daily production have not resulted in reversal of price movements, and crude prices continued their southward decline.”
Even the data on the medium-term trends in prices since 2022 for brent and Indian basket show that there has been a downward trend in crude prices. “The local peaks during the entire stretch indicate the impact of geopolitical risk, although the latest event in Venezuela has not impacted the price significantly on the upside,” says the report.
In its outlook on international oil prices, Soumya Kanti Ghosh, Group Chief Economic Advisor, SBI Resarch, projects oil prices to decelerate to $50 per bbl or even lower by June 2026, saying the outlook on Brent crude for 2026 is further softening from the current levels.
January 2026
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Notably, the US Energy Information Administration’s estimates are almost in line with SBI’s projections on oil. The agency has stated that the Brent crude oil price will fall to an average of $55 per barrel (b) in the first quarter of 2026, largely “driven by buildup of inventory”.
Ghosh writes that since the India basket has a correlation of 0.98 with Brent crude, the trends in Brent suggest further softening of Indian basket. “A moving average analysis for Indian crude shows that current prices are trending below the 50 and 200 period moving averages, suggesting future lower levels from the current level at $62.20 per bbl.”
An autoregressive quantile forecast for the Indian Basket indicates that the 50th percentile forecast by March 2026 is $53.31 and $51.85 by June 2026.
Domestic impact of energy price correction
In terms of inflation, the expected fall in Indian basket price by to $53.31 per barrel due to the dynamic daily pricing mechanism is expected to get transmitted to fuel station prices.
The expected 14% correction in the India Basket in Q4 FY26 could put downward pressure of 22 bps on CPI basket, assuming 48% passthrough, says the report, adding that this could average CPI inflation for FY27 decisively below 3.4%.
These inflation estimates are largely in line with the RBI’s December 3 policy announcements, when it said the headline inflation for Q1:2026-27 and Q2 are projected at 3.9 per cent and 4.0 per cent, respectively. “In fact, the underlying inflation pressures are even lower as the impact of an increase in the price of precious metals is about 50 basis points (bps),” as per the RBI.
For rupee movement, analysis using recent history suggests that assuming the USD/INR base price of ₹90.28, the 14% expected correction may result in 3% appreciation in rupee, that is around ₹87.5 per dollar (a part of this could play out in Q4FY26).
In terms of the GDP outlook, says SBI, the benign energy prices will impact the GDP outlook favorably, with an impact on annual GDP growth expected around 10-15 bps.
Notably, the central bank has projected the real GDP growth for 2025-26 at 7.3%, with Q3 at 7%, and Q4 at 6.5%. Real GDP growth for Q1:2026-27 is projected at 6.7% and Q2 at 6.8%.