Global crude oil prices are projected to rise significantly in the near term, with Brent crude potentially climbing to $110 per barrel and India's crude oil import basket reaching $130 over the next 10 trading days, according to a recent 'Ecowrap' report from SBI Research.
Geopolitical Risks Drive Up Oil Price Forecasts
The report, released on Monday, attributes this upward pressure on oil prices to persistent geopolitical tensions and supply-side risks. These factors are making it more challenging for the Reserve Bank of India (RBI) to stabilize the value of the Indian rupee.
SBI Research's projections are based on a recurrent neural network forecasting model, which indicates a rising trend for both dated Brent and the Indian crude oil basket. This suggests that any sharp decline in oil prices is unlikely in the short term, with a potential easing only over a longer horizon.
Phased Outlook for Crude Oil Prices
The research outlines three potential phases for crude oil prices, contingent on evolving geopolitical developments and the restoration of global supplies:
- Before November 3, 2026: Brent prices are expected to remain largely range-bound with a mild downward bias. Diplomatic efforts and emergency oil stock releases could offer some temporary relief, though implementation would take time. The US Energy Information Administration (EIA) forecasts an average Brent spot price of $105 per barrel for the fourth quarter.
- After November 3, 2026, through April 2027: A gradual easing of prices is anticipated if planned supply deliveries materialize. This includes US reserve deliveries scheduled for November and December, alongside Russian diesel supply relief extending until April 7.
- Longer Horizon: Greater scope for lower prices exists if Gulf oil exports recover. EIA projections suggest Brent could fall to $87 per barrel in Q2 2027 and $74 in Q4 2027, though these are reference scenarios, not SBI Research's direct price targets.
Impact on Rupee and RBI Interventions
The rising crude oil prices intensify pressure on the Indian rupee. In response, the RBI has implemented several measures to contain the currency's depreciation. These include a special dollar-supply window for major public sector oil companies (Indian Oil Corporation, Hindustan Petroleum Corporation, and Bharat Petroleum Corporation).
This initiative aims to divert approximately $10-12 billion in monthly dollar demand away from the open foreign exchange market. Unlike previous interventions that involved repayable currency swaps, this new arrangement entails direct dollar sales from India's foreign exchange reserves.
Additionally, SBI Research highlighted tighter liquidity conditions, including an increase in banks' minimum daily cash reserve ratio (CRR) maintenance requirement to 99% from 90%, and a planned sale of government securities worth Rs 25,000 crore. The combined effect of these RBI measures could withdraw over Rs 1 lakh crore from the banking system over time.
While acknowledging these pressures, SBI Research maintains that India's foreign exchange reserves are robust enough to manage contingencies. However, the report forecasts a narrower balance of payments surplus, estimated at $55-60 billion in FY27. The report also suggests that the government must address structural issues affecting capital inflows, as RBI intervention alone provides only limited support.