Amid improving market sentiment and a weakening dollar, the World Bank has raised its 2016 forecast for crude oil prices to $41 per barrel from $37 per barrel.
This is contained in its latest commodity Markets Outlook, stating that oversupply in markets is expected to recede.
Brent crude futures were up $1.30 or nearly three percent at $45.78 a barrel on Tuesday.
We expect slightly higher prices for energy commodities over the course of the year as markets re-balance after a period of oversupply.
Crude oil market recovered from a low of $25 per barrel in mid-January to $40 per barrel in April, following production disruption in Iraq and Nigeria and a decline in non-organisation of Petroleum Exporting Countries output, mainly US shale.
“We expect slightly higher prices for energy commodities over the course of the year as markets re-balance 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,” he said.
All main commodity indexes tracked by the World Bank are expected to decline in 2016 from the year before, due to persistent elevated supply.
Energy prices including oil, natural gas and coal, are due to fall by 19.3 percent in 2016 from the previous year. This would represent a more gradual drop than the 24.7 percent slide forecast in January.
Managing Director and Chief Executive Officer of the World Bank, Sri Mulyani Indrawati, has said that the Bank would support the Nigeria government strongly to accelerate its goals, thereby creating jobs for its citizens.
With oil and metals prices today 50 percent to 70 percent lower than their early 2011 peaks, natural resource development projects have already been put on hold or delayed in several emerging and developing countries.