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Oil prices outlook at risk both to upside, downside - WB

Economy Materials 20 May 2022 17:15 (UTC +04:00)
Oil prices outlook at risk both to upside, downside - WB
Maryana Ahmadova
Maryana Ahmadova
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BAKU, Azerbaijan, May 20. The price of Brent oil is forecast to average $100 per barrel in 2022, which is an increase of 42 percent, compared to 2021, which is also the highest annual average since 2013, Trend reports via Commodity Markets Outlook from the World Bank (WB).

According to the WB outlook, Brent oil prices are expected to decline to $92 per barrel in 2023. However, this is still above an average $60 per barrel in 2016-2021.

“Higher prices reflect the marked reduction in Russian exports and continued growth in oil consumption in advanced economies, despite the recent price increases,” the WB said.

Meanwhile, the WB report noted that risks to oil prices outlook are very high both to the upside, and downside. A more prolonged war in Ukraine or bigger disruptions in Russia’s oil exports could spike the prices even further.

“For example, the EU could ban, or phase out faster than currently expected, its imports of oil from Russia, which totaled 3.4 million barrels per day prior to the war. In such an event, the impact on oil markets and prices would depend on the extent of diversion of Russian exports to other countries, the scope for additional inventory releases, and the potential for production increases elsewhere,” the report added.

Also, the WB does not rule out a possible permanent reduction in Russian crude oil production as a result of foreign companies leaving Russian market, reducing access to capital and foreign technology and machinery.

Sharp prices’ increase and consequent alarms about energy security could urge changes in oil demand.

“For example, patterns of trade in crude oil and oil products are likely to be permanently altered, potentially raising transport costs, while purchases of electric vehicles may be accelerated, lowering oil demand in the medium term,” the report noted.

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