Crude oil headed to $50/barrel by June? SBI Research sees gains for India growth, inflation, rupee

A research note by SBI Research estimates crude oil to ease to around $50 per barrel levels by June this year, keeping consumer inflation below 3.4 per cent, favourably impacting GDP growth by 10-15 bps and helping the rupee appreciate to 87.5-odd levels against the US dollar. According to SBI's research team, the projected fall in Brent -- a crude oil benchmark -- is expected to be largely driven by buildup of inventory.

Where is crude oil headed?

A moving average analysis for Indian crude, which has a correlation of 0.98 with Brent, indicates that current rates are trending below the 50- and 200-period moving averages, suggesting lower levels from the current level at $62.20 per bbl going forward.

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The basket is seen softening in line with expected trends internationally, with SBI Research's base case projection at $50 per bbl or even lower by June 2026.

Brent Crude | What has cooled oil prices?

Oil prices have remained subdued due to producer grouping OPEC+'s decision to raise output. Eight key OPEC+ producers -- Saudi Arabia, Russia, Iraq, the UAE, Kuwait, Kazakhstan, Algeria and Oman -- have reaffirmed their commitment to stability amid a positive economic outlook and low inventories.

The eight producers are on track to reverse 2.2 million bpd in prior cuts from April 2025 over the next 18 months. This added supply amid steady non-OPEC output contributed to price softening from $80 per barrel levels toward $62-66/bbl in 2025.

The grouping is set to meet on February 1 next.

INR vs USD | Rupee seen moving below 88 vs dollar

Assuming the USD-INR pair base at 90.28, an expected 14 per cent correction may lead to 3 per cent appreciation in the rupee against the greenback, according to the research.

With this, the rupee is pegged at 87.5 against the American currency, a part of which could play out in the quarter ending March, according to the report.

Retail inflation (CPI) projection

SBI Research projects the fuel component in the consumer inflation basket to moderate further, as the dynamic daily pricing mechanism gets transmitted to station prices. With this, CPI inflation could average decisively below 3.4 per cent in FY27.

Oil prices constitute the largest component in import basket and cannot be substituted with domestic production in the short term. This is why the expected contraction in the import bill will impact the rupee.

Benign energy prices to impact GDP outlook favourably: SBI Research

According to the research team, the expected impact on annual GDP growth will be around 10-15 bps.

SBI Research pegs GDP growth to average 7.2 per cent.

No Venezuela impact

The report comes at a time when most economists expect no significant change in the 2026 crude oil price outlook on account of the Venezuela situation. Investors are assessing the potential impact on crude flows from Venezuela following the United States' move to capture Venezuelan President Nicolas Maduro.

Venezuela is home to the world's largest oil reserves.

Meanwhile, US President Donald Trump has warned of additional tariffs on India, once again criticising the South Asian economy's take on Russian oil.

India has already clarified its stance that it would continue to purchase oil from the best possible sources to protect its energy interests and its 140 crore consumers.