(Australian Associated Press)
With oil prices already below the World bank’s predicted levels for 2016, the global financial body has lowered its forecast.
The World Bank says it now predicts oil to sell around $US37, on average, amid continued weakness in emerging economies and an expanded supply of crude with the end of sanctions against Iran.
Three months ago, it predicted a median oil price of $US51 a barrel in 2016.
On Tuesday (0901 Wednesday AEDT), Brent crude was selling at $US31.51, and WTI was at $US31.13.
Last week, oil prices dipped below the key $US30 mark.
The World Bank’s downward revision in its latest Commodity Markets Outlook results from a number of factors, including the return of Iranian oil to the market, “greater resilience in US production due to cost cuts and efficiency gains” and a mild winter in the Northern Hemisphere.
Also contributing to the price fall are dim prospects for growth in emerging economies.
“Emerging market economies have been the main sources of commodity demand growth since 2000,” the World Bank said on Tuesday.
“As a result, weakening growth prospects in these economies are weighing on commodity prices. A further slowdown in major emerging markets would reduce trading partner growth and global commodity demand.”
While falling prices are a good thing for oil-importing nations, the impact is not instantaneous.
“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,” Ayhan Kose, director of the World Bank’s Development Prospects Group, pointed out.
The bank predicts a median oil price of $US48 a barrel in 2017.
The rebound will be smaller than those that followed the big dips in 1998 and 2008, because the “price outlook remains subject to considerable downside risks”, the World Bank said.