World Bank hikes crude oil price forecast to $43/barrel

The World Bank has hiked its forecast for crude oil prices this year to $43 per barrel from $41 per barrel on strong demand and supply constraints in the second quarter.

In its latest Commodities Markets Outlook, the multilateral lending institution said oil prices jumped 37 percent in the second quarter of the year due to wildfires in Canada and sabotage of oil infrastructure in Nigeria.

“We expect slightly higher oil prices for the second half of 2016 as oil market oversupply diminishes,” said John Baffes, senior economist and lead author of the report. “However, inventories remain very large and will take some time to be drawn down.”

Despite the recovery of oil prices in the second quarter of 2016, most commodity indexes tracked by the World Bank are expected to decline this year, said the report.

Energy prices – which include oil, natural gas and coal – are expected to fall 16.4 percent in 2016, a more gradual decline than the 19.3 percent drop anticipated in April.

Non-energy commodities, such as metals and minerals, agriculture and fertilizers, are expected to ease 3.7 percent this year because of abundant supply. This is a more moderate contraction than the 5.1 percent forecast in April.

In the same report, World Bank said metal prices are seen to fall eight percent this year and 11 percent next year on increased supply and weak prospects in China.

The World Bank publishes the Commodity Markets Outlook quarterly. The report provides detailed market analysis for major commodity groups, including energy, metals, agriculture, precious metals and fertilizers.