World Bank revises up oil price forecasts
Baku, Azerbaijan, Jan.10
By Leman Zeynalova - Trend:
The World Bank (WB) has slightly revised its oil price forecasts up for 2018.
Oil prices are projected to average $58 per barrel in 2018 - a slight upward revision from June forecasts - and edge up to $59 per barrel in 2019, the WB said in its Global Economic Prospects, January 2018 report.
“These projections reflect expectations of an increase in US production due to continued efficiency gains in the shale oil industry, moderate non-OECD (Organization for Economic Co-operation and Development) demand growth, and very limited OECD demand growth,” said the report.
Downside risks for oil prices arise mainly from the resilience of the US shale industry and from weak compliance to the agreed production cuts, according to the WB analysts.
Conversely, upside risks to prices include the possibility of supply disruptions among politically stressed oil producers (e.g., Iraq, Libya, Nigeria), as well as stronger demand growth, said the report.
The World Bank estimates that oil prices averaged $53 per barrel in 2017, up 24 percent from 2016, but were volatile throughout the year.
“Despite an agreement by some Organization of Petroleum Exporting Countries (OPEC) and non-OPEC producers to cut production, oil prices dropped to $46 in mid-2017, reflecting a rebound in US crude oil output and rising production from Libya and Nigeria, which were exempted from production targets,” said the report.
The price dip temporarily halted the upturn in US shale drilling. Prices then increased to around $60 per barrel toward the end of 2017, amid strengthening demand, falling stocks, and an agreement in late November to extend production cuts until the end of 2018, according to the WB estimates.
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