World Bank raises 2016 oil price forecast
WASHINGTON, July 26, 2016- The World Bank is raising its 2016
forecast for crude oil prices to $43 per barrel from $41 per barrel due
to supply outages and robust demand in the second quarter.
Oil prices jumped 37 percent in the second quarter of 2016 due to
disruptions to supply, particularly wildfires in Canada and sabotage of
oil infrastructure in Nigeria. The revised forecast appears in the World
Bank's latest Commodities Markets Outlook and takes into account a
recent softening of demand and the recovery of some disrupted supply.
"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 Commodities Markets Outlook. "However,
inventories remain very large and will take some time to be drawn down."
Despite the recovery of oil and many other commodity prices in the
second quarter of 2016, most commodity indexes tracked by the World Bank
are expected to decline this year. This trend is 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. However, most of
the declines are projected to be smaller than expected in the April
outlook.
Energy prices, which include oil, natural gas and coal, are due 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, a more moderate contraction than the 5.1 percent retrenchment
forecast in the previous outlook.Metals prices are projected to fall 11
percent in the coming year, a sharper decline than the 8.2 percent drop
forecast in April, reflecting weak demand prospects and new capacity
coming on line. Agriculture prices are forecast to fall less than
projected in April as a result of reduced harvests in South America and
plateauing demand for biofuels.
Because energy constitutes more than 10 percent of the cost of
agricultural production, movements in energy prices have been a major
factor in the path of food prices, a special feature of the Commodity
Markets Outlook says. Energy prices fell 45 percent in 2015 and are
projected to drop again this year. About one-third of the likely 32
percent drop in prices of grain commodities and soybeans from 2011
through 2016 is due to energy price declines.
Lower energy prices have also eased pressures to produce biofuels as
an alternative energy source. Biofuels production has been an important
driver of demand growth for food commodities in the past decade.
"Energy exporting emerging and developing economies have struggled to
adjust to persistently low prices," said Ayhan Kose, Director of the
World Bank's Development Prospects Group. "Partly because of the strong
linkages between energy prices and agricultural commodities prices,
agricultural producers can expect lower prices in an era of depressed
energy prices. Both energy and agricultural commodity exporting
countries need to step up economic diversification efforts to bolster
resilience to commodity price fluctuations."
The World Bank's Commodity Markets Outlook is published quarterly, in
January, April, July and October. The report provides detailed market
analysis for major commodity groups, including energy, metals,
agriculture, precious metals and fertilizers. Price forecasts to 2025
for 46 commodities are presented along with historical price data |
