Brent near $90 offers relief on fiscal, inflation fronts

At around 6:30pm, Brent crude’s January contract on the Intercontinental Exchange was trading at $90.22 a barrel, down 2.54% from its previous close. Brent had earlier slipped below $90 a barrel for the first time since 31 August. West Texas Intermediate’s December contract on the NYMEX fell 2.06% to $85.07 a barrel.

Brent was around $70 per barrel on 1 February 2026, when the Union Budget 2026-27 was presented. It was trading at $72 a barrel before the war began on 28 February.

“The fiscal impact continues. Due to high oil prices, the initial hit was borne by OMCs, as prices were not increased commensurately. There was, however, some ease as the retail prices were increased (in May). Further, when the government provides compensation or subsidy to OMCs in a bid to provide relief for the impact of high crude prices, then there is a fiscal impact,” Sen added.

State-run OMCs raised fuel prices by about ₹10 per litre in a staggered manner in May.

“If oil prices remain at this level or correct further, it will be beneficial to the economy. Prices of oil byproducts and fertilizers could moderate. Freight rates, too, could see a fall. All these would help lower inflation. Last but not least, a lower oil import bill could further strengthen the rupee and augur well for the country’s current account,” said D.K. Pant, chief economist at India Ratings.

Oil burden

Prashant Vashisht, senior vice president and co-group head, corporate ratings, Icra Ltd, noted that the fall in prices will ease pressure on OMCs, which have been incurring under-recovery on cooking gas and, at times, marketing losses on petrol and diesel sales.

He said that in October, the under-recovery on the sale of domestic liquefied petroleum gas (LPG) was around ₹230 per cylinder, and the marketing losses on the sale of petrol and diesel were ₹9 and ₹12 per litre, respectively.

A fall in oil prices bodes well for India, which imports nearly 90% of its crude oil requirements. The country’s crude oil import bill stood at about $123 billion in FY26. Every $1-per-barrel increase in crude prices sustained over a year could raise the annual import bill by up to ₹18,000 crore.

It adds to the Centre’s fiscal burden. A State Bank of India (SBI) report projected that the central government’s fiscal deficit could exceed the FY27 budget estimate by ₹1.2 trillion. The report cited a revenue loss of ₹1.1 trillion from the excise duty cut, along with increases of ₹90,000 crore in fertilizer subsidies and ₹48,000 crore in petroleum and LPG subsidies.

Domestic cooking gas remains subsidized for beneficiaries under the Pradhan Mantri Ujjwala Yojana (PMUY). In June, amid the West Asia war, the Centre reduced the number of subsidized LPG cylinders available to PMUY beneficiaries from nine to four a year, while retaining the subsidy at ₹300 per cylinder.

Temporary relief

Meanwhile, Goldman Sachs has raised its Brent crude price forecast to $105 a barrel for December 2026, from an earlier estimate of $90. It expects the benchmark to average $88 a barrel in 2027, up from its previous forecast of $80.

Higher oil prices could add to inflationary pressures at a time when retail inflation is already rising. India’s retail inflation climbed to a 23-month high of 5.54% in September, staying above the Reserve Bank of India’s (RBI) 4% midpoint target for the fourth consecutive month.

The economy, however, grew 7.8% in the first quarter of FY27, despite potential headwinds from the West Asia war, a delayed south-west monsoon and uncertainty over tariff policies, according to official data.

In its August monetary policy review, RBI had projected June-quarter growth at 7%, up from its earlier estimate of 6.6%. It also raised its FY27 growth forecast to 6.7% from 6.6%.

Rituraj Baruah

Rituraj Baruah is a special correspondent covering energy, housing, urban affairs, heavy industries and small businesses at Mint. He has reported on diverse sectors over the last eight years including, commodities and stocks market, insolvency and real estate; with previous stints at Cogencis Information Services, Indo-Asian News Service (IANS) and Inc42.