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Crude Oil to Settle at $80/Barrel in FY27, Impacting India's Trade Deficit

A report by ICICI Bank projects crude oil prices will settle around $80 per barrel in FY27, a significant increase from the previous year's average of $66. The forecast is driven by the ongoing Middle East conflict and the disruption of key trade routes like the Strait of Hormuz. This price surge is expected to widen India's goods trade deficit to $383 billion and its current account deficit to $60 billion, or 1.4% of GDP. India remains vulnerable due to its high dependence on oil and gas imports from the region.

Key Points: Crude Oil Price Forecast: $80/Barrel in FY27, India's Deficit to Widen

  • Oil price shock from Middle East conflict
  • Strait of Hormuz blockage impacts supply
  • India's CAD may hit 1.4% of GDP
  • Goods trade deficit revised to $383 billion
3 min read

Crude prices may settle at USD 80/barrel in FY27, higher than avg of USD 66/barrel last year: Report

ICICI Bank report forecasts crude oil at $80/barrel in FY27, up from $66 avg. India's trade and current account deficits to rise on higher imports.

"we believe that the oil prices could settle at ~USD 80/bbl. levels in FY27 - ICICI Bank Report"

New Delhi, March 17

Amid ongoing volatility in crude oil prices due to the West Asia war, oil prices are expected to settle at around USD 80 per barrel in the current financial year 2027, according to a report by ICICI Bank.

The report highlighted that the recent escalation in the Middle East conflict, along with the blockage of key trade routes, has led to a sharp increase in global oil prices, which have risen above USD 100 per barrel compared to an average of USD 66 per barrel during April 2025 -February 2026.

It noted that the disruption of the Strait of Hormuz, which contributes to about 20 per cent of global energy trade, has significantly impacted global oil supply.

It stated, "we believe that the oil prices could settle at ~USD 80/bbl. levels in FY27".

The report explained that for a normal oil price shock, every USD 10 per barrel increase in oil prices could lead to an increase in net oil imports and India's current account deficit by about USD 12 billion or 0.3 per cent of GDP.

However, in the current scenario, the impact could be broader due to disruptions in the region. India's goods exports, of which 15 per cent are linked to the region, and remittance inflows, which account for 38 per cent, could also be affected.

Despite a challenging global trade and geopolitical environment, India's goods exports have recorded modest growth of 1.8 per cent year-on-year in the current fiscal so far. Non-oil exports have performed better, rising by 5 per cent year-on-year.

On the import side, goods imports have grown at a faster pace of 8.5 per cent year-on-year, driven by higher gold imports, which surged by 29 per cent year-on-year, along with strong non-oil non-gold imports growing at 10.6 per cent year-on-year.

The report noted that both oil exports and imports have remained subdued so far, with oil exports declining by 17 per cent year-on-year and imports falling by 3 per cent year-on-year due to relatively lower oil prices earlier.

India remains particularly vulnerable to rising oil prices due to its high import dependence, with around 52-60 per cent reliance on oil imports and about 80-85 per cent dependence on petroleum gas imports from the region.

Given these factors, the report revised its base case for India's goods trade deficit to USD 383 billion in FY27, up from the earlier estimate of USD 363 billion.

Similarly, the current account deficit is now projected at USD 60 billion or 1.4 per cent of GDP, compared with earlier estimates of USD 45 billion or 1.0 per cent of GDP.

The report added that while the war and trade disruptions are not expected to last for a prolonged period, the sharp rise in oil prices and associated risks could continue to impact India's external balances in the near term.

- ANI

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Reader Comments

P
Priya S
The impact on remittances is worrying. So many families, especially in Kerala and the Gulf states, depend on that money. A double whammy of higher oil prices and lower remittances could really hurt household budgets. Hope the situation in West Asia calms down soon. 🤞
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Arjun K
While the report is concerning, I appreciate that it's not all doom and gloom. Non-oil exports growing at 5% is a positive sign. It shows our manufacturing and services sectors have resilience. We need to double down on this and reduce our overall dependence on oil imports.
S
Sarah B
The revised CAD projection from 1.0% to 1.4% of GDP is a significant jump. This will put pressure on the rupee and could lead to imported inflation. The RBI will have a tough balancing act ahead between managing inflation and supporting growth.
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Vikram M
We've been talking about reducing oil dependence for decades. Where are the concrete results? 85% dependence on gas imports is alarming. Solar, wind, ethanol blending – all need to move much faster. Jai Hind, but we need action, not just reports.
K
Kavya N
The gold import number jumping 29% is interesting. Even with economic uncertainty, people are buying gold. It's a cultural safe-haven asset, but it does add to the import bill. Maybe this is a sign people are worried and saving in tangible assets.

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