Crude oil prices are anticipated to decrease significantly, reaching approximately $50 per barrel by June 2026, as per a report by SBI Research. This reduction is likely to keep CPI inflation below 3.4% in the fiscal year 2027. The report, authored by Dr. Soumya Kanti Ghosh, the Group Chief Economic Advisor at State Bank of India, suggests that lower energy prices will have a positive impact on the GDP outlook, with an expected growth impact of 10-15 basis points annually.
The US Energy Information Administration predicts that Brent crude oil prices will average around $55 per barrel in the first quarter of 2026, mainly due to inventory accumulation. Given the high correlation of the India basket with Brent crude, any decline in Brent prices is expected to lead to a further softening of the Indian basket. An analysis of Indian crude prices indicates that they are currently below the 50 and 200 period moving averages, hinting at potential future declines from the current level of $62.20 per barrel.
Dr. Ghosh’s autoregressive quantile forecast for the Indian basket projects a price of $53.31 by March 2026 and $51.85 by June 2026. This expected drop in the Indian basket price to $53.31 per barrel, influenced by the dynamic daily pricing mechanism, is likely to impact fuel station prices. The historical correlation between prices in four metro cities suggests that the fuel component of the CPI basket could see further moderation, with an estimated 14% correction in the India Basket in Q4 FY26 potentially reducing CPI inflation for FY27 below 3.4%.
An analysis based on recent trends indicates that assuming a USD/INR base price of Rs 90.28, the anticipated 14% correction may lead to a 3% appreciation in the rupee, approximately reaching Rs 87.5 per dollar, with a portion of this adjustment expected in Q4 FY26.
