São Paulo – With the exception of oil, the World Bank revised down its forecasts for the average price of commodities in 2015, according to the survey Commodity Markets Outlook, released this Wednesday (22nd). In the case of oil, the forecast of US$ 53 per barrel from April went up to US$ 57 due to an increase of 17% in international prices of the product throughout Q2.
The other items of the “energy” group, however, had a price decline from April to June: -13% with natural gas and -4% with coal. Thus, average prices of the sector, including oil, should stay, this year, 39% below of those registered in 2014, according to the World Bank.
“Demand for crude oil was higher than expected in the second quarter. Despite the marginal increase in the price forecast for 2015, large inventories and rising output from OPEC [country] members suggest prices will likely remain weak in the medium-term”, said John Baffes, the World Bank’s senior economist and the main author of the survey.
The bank points out the possibility of the easing of restrictions to oil exports from Iran, due to the nuclear agreement signed by the Persian country and the United States and other world powers. In theory, this could expand the product’s supply in the market and pressure the prices down.
Other factors that could also contribute for a fall in prices are a higher than expected output increase in non-OPEC member nations and the continuing growth of extraction by the organization’s members.
On the other hand, prices could be pressured up in case oil companies decide to cease operations due to high operation costs. The bank reports, for instance, that in the United States the number of operational platforms declined 60% since last November. With prices down, it could be non-profitable to maintain expensive plants.
The organization also cites “geopolitical tensions” as a factor that could affect a possible price increase. It’s worth remembering that important oil producing countries, such as Iraq and Libya, are dealing with conflicts.
In the sector of metal commodities, the bank reports that prices declined only marginally in H1. With the highlight being iron ore, today with costs two-third lower than in 2011.
In this sense, the report estimates that metal prices should be, on average, 16% lower in 2015 over 2014. In April, the forecast pointed to a decline of 12%.
The main decline, of 43%, should be seen exactly with iron ore, driven by new operations of low-cost mining, especially in Australia. This is detrimental to Brazil, since the country is one of the largest producers and exporters of the product in the world.
According to the bank, the metal market is going through a moment of ceasing of costly and low-investment operations.
Agriculture
In the agricultural sector, the bank points to a reduction of 2.6% in prices from April to June, especially among grains and edible oils. The institution believes that average prices this year should remain 11% below the 2014 level. April’s projection indicated a decline of 9%. Also in the bank’s forecast, a decline of 5% in the price of fertilizers.
Brazil also is one of the largest producers and exporters of agricultural commodities in the world, therefore low prices are bad news for local producers and the balance trade. Cheaper fertilizers, however, could contribute for a cost reduction, since the majority of it used by the country is imported.
*Translated by Sérgio Kakitani
