World Bank Raises Crude Price Out­look

Lat­est Com­mod­ity Mar­kets Out­look projects $41/ bar­rel on lower over­sup­ply

The Economic Times - - Economy: Macro, Micro & More - Our Bureau

New Delhi: The World Bank has raised its fore­cast for crude oil prices in 2016 cit­ing a likely de­cline in over­sup­ply in the mar­ket, but there is not such re­ver­sal in sight for other com­modi­ties yet.

In its lat­est Com­mod­ity Mar­kets Out­look, the World Bank has pro­jected crude at $41 a bar­rel com­pared with $37 a bar­rel in 2015.

“We ex­pect slightly higher prices for en­ergy com­modi­ties over the course of the year as mar­kets re­bal­ance af­ter a pe­riod of over­sup­ply,” said John Baffes, se­nior econ­o­mist and lead author of the Com­modi­ties Mar­kets Out­look, through a state­ment re­leased by the World Bank. “Still, en­ergy prices could fall fur­ther if OPEC in­creases pro­duc­tion sig­nif­i­cantly and non-OPEC pro­duc­tion does not fall as fast as ex­pected.”

There is no respite for other com­modi­ties though. “All main com­mod­ity in­dexes tracked by the World Bank are ex­pected to de­cline in 2016 from the year be­fore due to per­sis­tently el­e­vated sup­plies, and in the case of in­dus­trial com­modi­ties—which in­clude en­ergy, me­tals and agri­cul­tural raw ma­te­ri­als—weak growth prospects in emerg­ing mar­ket and de­vel­op­ing economies,” the state­ment said.

The out­look ex­pects en­ergy prices to fall 19.3% in 2016 from the pre­vi­ous year, while non-en­ergy com­modi­ties are fore­cast to drop 5.1% in the cur­rent year. “Me­tals prices are pro­jected to fall 8.2% in the com­ing year, less than the 10.2% drop fore­cast in Jan­uary, re­flect­ing ex­pec­ta­tions of stronger de­mand growth by China,” it said.

The re­port said many re­source de­vel­op­ment projects have been put on hold or de­layed in emerg­ing and de­vel­op­ing coun­tries be­cause of de­cline in prices. “Th­ese project de­lays can ad­versely af­fect coun­tries that can ill-af­ford such set­backs,” said Ay­han Kose, di­rec­tor of World Bank De­vel­op­ment Prospects Group. “Greater trans­parency, im­proved govern­ment ef­fi­ciency and im­prove­ments in macroe­co­nomic frame­works could soften such dis­rup­tions. Coun­tries may pre­fer to wait for prices to start ris­ing again be­fore launch­ing new nat­u­ral re­source de­vel­op­ment ini­tia­tives.”

Crude oil has re­bounded from $25 per bar­rel at start of the year to $40 in April

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