World Bank Raises Crude Price Outlook
Latest Commodity Markets Outlook projects $41/ barrel on lower oversupply
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