The World Bank has retained its forecast for crude oil prices this year at $55 per barrel, but its projecting a price increase of $60 a barrel by 2018, owing to production cutback of petroleum exporting countries.
In its April Commodity Markets Outlook report released recently, the World Bank said it is holding steady its crude oil price forecast for this year at $55 per barrel, but noted of a projected increase to an average of $60 per barrel in 2018.
“Rising oil prices, supported by production cutbacks by the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC states, will allow markets to gradually rebalance,” the World Bank said.
The World Bank noted that the oil price forecasts are subject to downside risks should the rebound in the US shale oil industry be greater than expected.
“Crude oil inventories have remained high, mainly in the United States, but are expected to start declining in the second quarter as seasonal refinery demand picks up,” the report said.
In contrast, the World Bank noted that prices of energy commodities, which include natural gas and coal, are projected to rise 26 percent this year and eight percent in 2018.
Natural gas price is forecast to go up by 15 per cent this year, led by a jump in US prices.Similarly, coal is seen to climb six per cent this year due to earlier supply restrictions in China, which consumes half the world’s coal output.
Meanwhile, prices of non-energy commodities, including agriculture, fertilizers, and metals and minerals, are forecast to increase in 2017, the first rise in five years.
“Metal prices are projected to jump 16 percent this year due to strong demand, especially from China, and supply constraints, including mine disruptions in Chile, Indonesia and Peru,” the World Bank said.The report added that labor strikes and contractual disputes at large mines have contributed to higher copper prices.
“However, precious metals are expected to decline by one percent this year and next year as benchmark interest rates rise and safe-haven buying ebbs,” the report said.