Following robust demand for crude and disruptions to supply in the second quarter, the World Bank raised on Tuesday its 2016 forecast for crude oil prices to US$43 per barrel from US$41 per barrel, but warned oversupply would take some time to diminish.
The crude price expectation is still 15 percent lower from 2015, the World Bank said in its latest quarterly Commodities Markets Outlook.
In the second quarter this year, oil prices surged 37 percent on the back of supply disruptions caused by wildfires in Canada and sabotages of oil facilities in Nigeria.
The World Bank sees oil prices slightly rising in the second half of this year as oversupply is expected to decline, John Baffes, Senior Economist and lead author of the Commodities Markets Outlook, said.
"However, inventories remain very large and will take some time to be drawn down," Baffes noted.
Most of the commodity indexes the World Bank analyzes are expected to be lower this year, despite the recovery of oil prices and prices of many other industrial commodities. The decline in the indexes is attributed to consistently high supply volumes. Moreover, weaker growth prospects in the emerging and developing economies depress industrial commodities which include energy, metals and agricultural raw materials. The declines in the indexes, however, are seen to be lower than in the previous outlook the World Bank published in April. Related: Low Oil Prices Kill Off 7 Billion Barrels Of Oil Production
The prices of energy - including oil, natural gas and coal - are now projected to drop 16.4 percent this year, compared to the World Bank's April estimate for a 19.3-percent drop. In 2015, energy prices had slumped 45 percent.
"Energy exporting emerging and developing economies have struggled to adjust to persistently low prices," Ayhan Kose, Director of the World Bank's Development Prospects Group, said.
Countries exporting energy and agricultural commodities have to seek to diversify their economies in order to increase resilience to fluctuations in commodity prices, Kose noted.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More