Oil prices seen rising as oversupply diminishes
Good news for Nigeria: Oil prices seen rising as oversupply diminishes, $41 per barrel
-World Bank Raises 2016 Oil Price Forecast, Revises Down Agriculture Price Projections
Lashley Oladigbolu a WorldBank OMBC Correspondent reports.
WASHINGTON, April 26, 2016
Amid improving market sentiment and a weakening dollar, the World Bank is raising its 2016 forecast for crude oil prices to $41 per barrel from $37 per barrel in its latest Commodity Markets Outlook, as an oversupply in markets is expected to recede.
In the quarterly report from World Bank's Commodity Market Outlook released on 26th April, 2016 it was revealed that the crude oil market rebounded from a low of $25 per barrel in mid-January to $40 per barrel in April following production disruptions in Iraq and Nigeria and a decline in non-Organization of the Petroleum Exporting Countries production, mainly U.S. shale. A proposed production freeze by major producers failed to materialize at a meeting in mid-April.
''Low commodity prices are undermining growth prospects for many resource-rich countries that experienced a surge in exploration, investment, and production during the commodities boom of the 2000s. Countries that have borrowed and invested heavily in anticipation of faster growth may struggle to service their debt and sustain investment when growth disappoints as a result of lower commodity prices'', a special feature of the Commodity Markets Outlook says.
"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. "Still, energy prices could fall further if OPEC increases production significantly and non-OPEC production does not fall as fast as expected."
With oil and metals prices today 50 percent to 70 percent lower than their early 2011 peaks, natural resource development projects have already been put on hold or delayed in several emerging and developing countries.
“These project delays can adversely affect countries that can ill-afford such setbacks,” said Ayhan Kose, Director of the World Bank’s 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.”
Energy prices, including oil, natural gas and coal, are due to fall 19.3 percent in 2016 from the previous year, a more gradual drop than the 24.7 percent slide forecast in January. Non-energy commodities, such as metals and minerals, agriculture, and fertilizers, are due to decline 5.1 percent this year, a downward revision from the 3.7 percent drop forecast in January.
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 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.
Lashley Oladigbolu is a London based accredited Journalist for World Bank Online Media Briefing Centre