São Paulo – The World Bank has increased its projection for the average price of an oil barrel this year. The Commodity Markets Outlook report released this Tuesday (26th) estimates the oil barrel price at USD 41. As of January, the forecast was USD 37.
The bank explains the upward revision by increased optimism across markets and an expected decrease in oil oversupply. It adds that the commodity’s price climbed from USD 25 by mid-January to USD 40 in April, in the wake of production issues in Iraq and Nigeria and declining output in countries that are not members of the Organization of Petroleum Exporting Countries (Opec), notably the United States and its oil shale.
“We expect slightly higher prices for energy commodities over the course of the year as markets rebalance after a period of oversupply,” a press release quoted the World Bank senior economist and the report’s leading author John Baffes as saying. He warns, however, that prices can drop again in case Opec member countries agree to increase output and non-members fail to reduce their own production as expected.
In spite of the higher oil price estimate, the World Bank believes the average prices of major commodities will fail to match 2015 levels this year, due to abundant availability and the low growth prospects in emerging and developing nations.
The prices of energy commodities (oil, gas and coal) should drop 19.3% on average. In January, a sharper, 24.7% drop over 2015 was expected.
Metal commodities prices are seen to drop 8.2%. Last January, the forecast had been 10.2% due to expectations of stronger demand from China.
Agricultural commodities may grow cheaper than the World Bank had expected in January, as a result of good grain and oilseed harvests and lower energy costs.
The bank warns that cheap commodities are hampering growth expectations in resource-rich countries. “Natural resource development projects have been put on hold or delayed in several emerging and developing countries […] and these project delays can adversely affect countries that can ill-afford such setbacks,” said Ayhan Kose, the director of the World Bank’s Development Prospects Group, according to the report. “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,” he pondered.
*Translated by Gabriel Pomerancblum
