São Paulo – The World Bank (Ibrd) lowered its 2016 forecasts for prices of 37 commodities out of the 46 analyzed, according to a report published this Tuesday (26th). The bank emphasized the lowering of the forecast of the average price of the crude oil barrel in 2016, which dropped from USD 51 in a survey done in October to USD 37 in the current report.
Among the factors that caused the bank to cut down its forecasts are the sooner-than-anticipated resumption of oil exports by Iran, weak growth prospects in emerging economies, the resilience in US production due to cost cuts and efficiency gains, the maintenance of production policy by the Organization of the Petroleum Exporting Countries (Opec), among others. The organization emphasizes the fact that the oil barrel price fell under USD 30 this month.
The World Bank says, however, that a gradual recovery of prices could happen throughout 2016. The organization believes that the strong drop seen at the beginning of the year doesn’t reflect the reality of the market and that a reversal of this scenario could occur. Besides, some exporting countries should cut down production due to the low prices, especially those with high extraction costs, and some growth of global demand is also expected.
In general, according to the organization, prices of commodities should continue to decline this year due to a large supply combined with the reduction of demand in emerging countries. These nations, according to the Ibrd, were the main reason for the growth of global demand for commodities since 2000.
“Low prices for oil and commodities are likely to be with us for some time”, said John Baffes, senior economist and lead author of the Commodities Markets Outlook, in the organization’s statement.
The director of the World Bank’s Development Prospects Group, Ayhan Kose, added that the low commodity prices are a double-edged sword, since commodity-exporting countries suffer with the decline in revenues, while importing countries benefit with a drop in spending.
The bank believes that the oil price will be, on average, 27% lower this year compared to 2015. Outside the fuel sector, the World Bank believes that the price of commodities will be, on average, 3.7% lower in 2016. Declines of 10% among metals and of 1.4% among agricultural commodities are expected.
With agricultural products, the bank says that the forecast reflects the expectation for good crops, despite the possible effects of the climate phenomenon El Niño, besides the “comfortable” level of global stocks, lower energy costs and plateauing demand for biofuel.
*Translated by Sérgio Kakitani
