Amid improving market sentiment and a weakening dollar, the World Bank has raised its 2016 forecast for crude oil prices to US$41 per barrel from US$37 in its latest Commodity Markets Outlook, as an oversupply in markets is expected to recede.
The crude oil market rebounded from a low of US$25 per barrel in mid-January to US$40 per barrel in April following production disruptions in Iraq and Nigeria. A proposed production freeze by major producers failed to materialise at a meeting in mid-April.
"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."
All main commodity indices 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 are expected in emerging markets and developing economies.
Energy prices, including oil, natural gas and coal, are due to fall 19.3% in 2016 from the previous year, a more gradual drop than the 24.7% slide forecast in January. Non-energy commodities, such as metals and minerals, agriculture and fertilisers, are due to decline 5.1% this year, a downward revision from the 3.7% drop forecast in January.
