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World Bank sharply lowers projection for 2016 oil prices

Xinhua, January 27, 2016 Adjust font size:

The World Bank cut its 2016 forecast for crude oil prices to 37 U.S. dollars per barrel and foresaw other commodity prices to shed further this year due to weak demands from emerging economies.

In its latest Commodity Markets Outlook report, the bank said the lower forecast reflects sooner-than-anticipated resumption of exports by Iran, greater resilience in U.S. production and weak growth prospects in major emerging market economies.

In its last October's projections, the World Bank said the oil prices would stay around 51 U.S. dollars a barrel in 2016.

Oil prices fell by 47 percent in 2015. However, a gradual recovery in oil prices is expected this year since demand is expected to strengthen somewhat with a modest pickup in global growth.

The anticipated oil price recovery is forecast to be smaller than the rebounds that followed sharp drops in 2008, 1998 and 1986. The price outlook remains subject to considerable downside risks, according to the report.

"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.

"While we see some prospect for commodity prices to rise slightly over the next two years, significant downside risks remain," he said.

Beyond oil markets, all main commodity price indices are expected to fall in 2016 due to persistently large supplies and slowing demand in emerging market economies.

"It takes time for the benefits of lower commodity prices to be transformed into stronger economic growth among importers, but commodity exporters are feeling the pain right away," said Ayhan Kose, Director of the World Bank' s Development Prospects Group.

Non-energy prices are expected to slip 3.7 percent in 2016, with metals dropping 10 percent after a 21 percent fall in 2015, due to softer demand in emerging market economies and gains in new capacity.

Agriculture prices are projected to decline 1.4 percent, with decreases in almost all main commodities groups, reflecting adequate production prospects despite fears of El Nino disruptions, comfortable levels of stocks, lower energy costs and plateauing demand for biofuel, the report noted. Endit