Crude Oil Prices May Fall to $70/Barrel in 2027 as External Conditions Improve: SBI Report

New Delhi: Crude oil prices are expected to moderate to around USD 70 per barrel in 2027 as prospects of de-escalation in the US-Iran conflict, increasing crude exports from the Middle East and improving external conditions could ease pressure on global oil markets, highlighted a report by the State Bank of India (SBI).

The report said Brent crude prices are likely to ease over the next 10 days, with the average price expected to remain around USD 87 per barrel, according to its LTSM forecast.

It said, “Possibility of peace deal, more predictable US after mid-term elections, increasing crude exports from Middle East despite shortage in diesel will help prices stay on the lower side and could touch February 2026 levels of around USD 70 in 2027”.

The report also highlighted that the improvement in the external environment is also one of the factors influencing SBI's assessment of the Reserve Bank of India's upcoming monetary policy decision.

For the first time in the new series, India's Consumer Price Index (CPI) inflation crossed the 6% mark and stood at 6.09 per cent in October 2026 and breached the RBI's upper tolerance level.

SBI expects inflation to remain above the 6 per cent mark for the next month before decelerating thereafter.

However, the bank believes that improving external conditions, exchange-rate stability and the revival in capital flows have reduced the possibility of a larger interest rate adjustment.

"We believe that the balance of probabilities has decisively shifted towards a 25-bps rate hike in December, rather than a larger 50-bps adjustment," the report stated.

SBI identified four factors behind this assessment, including exchange-rate stability, improvement in the external environment, prospects of de-escalation in the US-Iran conflict and the possibility of softer US Treasury yields.

The report said the RBI's efforts to manage rupee volatility have yielded results, with the currency moving back below Rs 94/USD before moving up. It also noted that foreign investor inflows have reached approximately USD 7.65 billion since November 6.

The bank expects the terminal repo rate to settle around 6.0 per cent, with a downside possibility of 5.75 per cent, and does not consider another rate hike in February advisable, particularly given the proximity to the Union Budget.

SBI also said concerns over the possible impact of El Niño on food inflation could be overstated, with its assessment indicating that the impact may remain limited and concentrated in certain pockets, including oilseeds, sugarcane and pulses. 

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