The World Bank has nudged up its 2015 forecast for crude oil prices from $53 per barrel in April to $57 after prices rose 17 per cent in the April- June quarter.
The bank’s latest commodity markets outlook report notes that energy prices rose 12pc in the quarter, with the surge in oil offset by declines in natural gas (down 13pc) and coal prices (down 4pc).
On Thursday, oil prices rose on the weaker dollar but remained under pressure as the global glut of oil continued. US oil futures settled below the key $50 a barrel mark for the first time since early April on Wednesday after an unexpected increase in US crude inventories.
A high production from the Organisation of the Petroleum Exporting Countries (Opec) and limited growth in global oil demand, however, continue to pressurise oil prices. The World Bank expects energy prices to average 39pc below 2014 levels.
The bank also projects decline in natural gas prices across all three main markets — the US, Europe and Asia. It also predicts coal prices to fall 17pc. Excluding energy, the World Bank reports a 2pc decline in prices for the quarter, and forecasts that non-energy prices will average 12pc below 2014 levels this year.
“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 members suggest prices will likely remain weak in the medium term,” said John Baffes, senior economist and lead author of the bank’s report.
Iran’s nuclear agreement with the US and other leading governments will ease sanctions, including restrictions on oil exports from the Islamic Republic of Iran, the report said.
According to the report, downside risks to the forecast include higher-than-expected non-Opec production (supported by falling production costs) and continuing gains in Opec output.
Possible upside pressures may come from closure of high-cost operations. The number of operational oil rigs in the US is already down 60pc since its November high. Geopolitical tensions could also bring upside pressures.
In a special feature assessing the roles played by China and India in global commodity consumption, the World Bank finds that demand from China and, to a lesser extent from India, over the last two decades significantly raised global demand for metals and energy — especially coal — but less so for food commodities.