Crude oil prices are expected to average US$ 65–US$ 70 per barrel in 2025, potentially falling to US$ 60 in 2026 due to weak global demand and rising supply. For India, which imports over 80% of its crude oil, lower prices ease inflation and reduce import costs, benefiting sectors like aviation and paint. Oil marketing companies gain from better margins, while upstream firms like ONGC may face profitability challenges. Retail fuel prices may be lowered if prices continue to remain low.
Analysts predict that crude oil prices will average US$ 65 to US$ 70 per barrel this year, with a possible further drop in 2026 driven by declining global demand and growing supply.
Brent crude prices have dropped significantly, with prices hovering around US$ 60 per barrel as of Monday (May 5, 2025). The decline follows the Organisation of Petroleum Exporting Countries (OPEC), led by Saudi Arabia, announcing an additional output increase of 411,000 barrels per day in June. This comes on the heels of a similar production hike declared for May.
According to Manas Majumdar, Partner and Leader Oil and Gas at PwC India, “Our projection is that crude prices may average US$70 per barrel this year which may decline and hover around US$60 per barrel in 2026, but then OPEC will reduce supply correspondingly which may result in prices bouncing back.”
How the falling crude prices are impacting India
Global oil prices have fallen sharply, with Brent crude dropping by 4.6% to around US$58 per barrel as trading began on May 5. This marks a near four-year low, approaching the levels seen in early April 2025. West Texas Intermediate (WTI) was near US$56 at the same time.
The fall from over US$ 77 per barrel on March 31, is driven by concerns about a global economic slowdown, including retaliatory tariffs imposed by China. The additional supply from OPEC+ has further contributed to the downward price trend, said Prashant Vasisht, Senior Vice President and Co-Group Head at ICRA.
For India, which imports over 80% of its crude oil, falling prices offer significant economic relief. It helps ease inflationary pressures, reduces the import bill, strengthens the rupee, and leaves more fiscal space for development spending and subsidies where needed. Lower energy costs also provide a tailwind for industries and consumers alike, boosting overall economic growth.
As per the Petroleum Planning and Analysis Cell, the average price of India’s crude basket stood at US$ 67.73 per barrel in April but dropped to US$61.89 on May 1. This decline helps alleviate inflationary pressures and eases the fiscal burden on the country.
Notably, while falling oil prices benefit India, the impact is not the same across all sectors. Airlines like IndiGo and SpiceJet, as well as paint manufacturers like Asian Paints and Berger, will benefit from lower fuel and production costs. However, oil exploration companies like ONGC and Oil India stand to lose substantial revenue, estimated at ₹300–₹400 crore annually for every US$ 1 drop in crude oil prices.
Analysts suggest that for oil prices to fall further, there needs to be an increase in global supply, assuming demand and other factors remain constant.
OPEC+, led by Saudi Arabia, may increase oil production for two key reasons. First, to enforce discipline among its members, as Saudi Arabia has accused countries like Kazakhstan and Iraq of exceeding their agreed production quotas. Second, external pressure, especially from figures like US President Donald Trump, pushing for lower prices to stabilize the global economy.
Impact over domestic oil companies
If crude prices remain subdued, state-owned oil marketing companies (OMCs) such as Indian Oil Corporation (IOCL), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) are likely to benefit from improved marketing margins and increased profitability.
Industry experts anticipate continued downward pressure on global oil prices. If current price levels persist, there is growing optimism about potential retail fuel price cuts by the OMCs.
Last month, Oil Minister Hardeep Singh Puri stated that lower crude prices provide room for petrol and diesel price reductions. He affirmed that if crude remains around US$ 65 per barrel, OMCs should be able to lower fuel prices.
According to Elara Securities, international crude prices averaged US$ 65 per barrel in Q1, FY ’26, marking a US$ 10 decline from Q4FY25. This price drop has raised the gross margin on gasoline and diesel by ₹3.5 per litre, even after factoring in a ₹2 per litre excise duty hike. The firm noted that every US$ 1 drop in crude oil price enhances OMCs’ gross margins by ₹0.55 per litre.
For FY26, Elara Capital projects BPCL’s integrated EBITDA margin (per unit of refining and marketing) to surge 49% year-over-year to ₹4,023 per tonne. IOCL’s margin is expected to rise even more sharply—by 91% to ₹4,000 per tonne. However, for upstream oil exploration companies like Oil and Natural Gas Corporation (ONGC) and Oil India Ltd, falling crude prices could hurt revenues and reduce crude price realizations.
Conclusion
India stands to gain economically from falling crude oil prices through lower import bills, reduced inflation, and improved margins for oil marketing companies. Sectors like aviation and manufacturing benefit, while upstream oil producers like ONGC face revenue challenges. The future trend of crude prices will depend on global demand, supply adjustments, and strategic decisions by OPEC+ members.
