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Informist, Tuesday, Jan. 6, 2026

 

MUMBAI - India's crude oil basket price is expected to soften significantly in 2026, according to a report by State Bank of India. Crude oil prices will fall to an average of $50 per barrel by June 2026, mainly due to rising oil inventories, the bank's report said. The fall in prices is also based off the US Energy Information Administration's estimates of Brent crude oil prices for 2026.

 

The US agency estimates that Brent crude oil prices will fall to an average of $55 per barrel in the first quarter of 2026, largely due to a buildup of inventory. Given the correlation of 0.98 between Brent crude and the Indian crude basket, this trend points to further softening in Indian basket prices as well, the bank said. 

 

A moving average analysis of Indian crude prices indicates that the current price levels are trending below the 50 and 200 period moving averages, the bank said. This technical trend points to the possibility of lower prices ahead from the current level of $62.20 per barrel. 

 

The expected decline in crude prices is also likely to impact India's inflation dynamics. The expected fall in Indian basket price due to the dynamic daily pricing mechanism will get transmitted to fuel station prices, the bank said. "The expected 14% correction in India basket in the Jan-Mar quarter of 2025-26 (Apr-Mar) is expected to put downward pressure of 22 basis points on consumer price index basket assuming a 48% passthrough. This could average CPI inflation for FY27 decisively below 3.4%," it added.

 

Since oil prices constitute the largest component in the import basket and cannot be exchanged for domestic production in the short term, contraction of the import bill on account of crude import prices will impact the rupee, the bank said. "Analysis using recent history suggests that assuming the USD/INR base price of 90.28, the 14% expected correction (in India's crude basket) may result in (a) 3% appreciation in rupee to approximately 87.50 per dollar... a part of this could play out in Q4FY26," it said.   

 

A fall in energy prices will impact the GDP outlook favourably. The expected impact on annual GDP growth is around 10-15 bps, the bank said.  End

 

US$1 = INR 90.20

 

Reported by Reshma Ravi

Edited by Nishant Maher

 

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