Oil prices are expected to average $65 a barrel this year, up from the $53 per barrel average of 2017, driven by strong consumer demand and OPEC’s continued cuts, the World Bank said in its April Commodity Markets Outlook.
The World Bank now expects prices of energy commodities—crude oil, natural gas, and coal—to jump as much as 20 percent in 2018, which is a 16-percentage point upward revision from the bank’s previous commodity market outlook from October last year.
“Accelerating global growth and rising demand are important factors behind broad-based price increases for most commodities and the forecast of higher commodities prices ahead,” said Shantayanan Devarajan, World Bank Senior Director for Development Economics and acting Chief Economist. “At the same time, policy actions currently under discussion add uncertainty to the outlook,” Devarajan noted.
“Strong oil demand and greater compliance by the OPEC and non-OPEC producers with their agreed output pledges helped tip the market into deficit,” said John Baffes, Senior Economist and lead author of the Commodity Markets Outlook.
Next year, the World Bank sees oil prices averaging $65 as well.
Early on Wednesday, as the market was awaiting the weekly EIA inventory report, Brent Crude was around $73 a barrel and WTI Crude hovered around $68 per barrel, after Brent briefly broke above $75 early on Tuesday as geopolitical concerns were the prevailing market sentiment. Related: Goldman: Oil Demand Will Continue To Soar
“Although prices are projected to decline from April 2018 levels, they should be supported by continued production restraint by OPEC and non-OPEC producers and strong demand,” the World Bank said in its commodity outlook.
Oil prices could see upward pressure in the coming weeks and months in case of constraints to U.S. shale production, geopolitical tensions in several producing nations, and the U.S. possibly not waiving the sanctions on Iran, according to the World Bank—a view shared by many analysts and investment banks.
In terms of downside risks to oil prices, the World Bank’s picks are potential weakening in compliance in the OPEC/non-OPEC production cuts or “outright termination of the accord”, growing oil production from Libya and Nigeria, and faster-than-anticipated U.S. shale production.
By Tsvetana Paraskova for Oilprice.com
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I maintain that I can do a far better job of oil price forecasting than the entire World Bank oil price forecasting staff.
They say oil prices will average $65.00 USD PER BARREL for both 2018 and 2019. On the other hand, I say that their forecasts are far too low and I predict that oil prices will hit atleast $100.00 USD PER WTI BARREL by the end of 2019. For yearend 2018, I forecast an oil price of atleast $75.00 and up to the mid $80.00 range. Now this does not mean that some wild price swings will not occur over this time period because they certainly will. History proves that. Let us all just sit back and wait to see who is more right, me or the entire World Bank oil price forecasting staff. I rest my case for now until January 2020 when we shall revisit their oil price claims and mine also once again as well to see who is more right, me or them. I bid you all goodbye until then.
Current geopolitical concerns have already been factored in. Therefore, their impact on oil prices could not be more than $1-$2 a barrel. There is a possibility they may escalate a bit in which case they may aid the rise in oil prices.
The OPEC/non-OPEC production cut agreement is here to stay for the foreseeable future because its architects, Saudi Arabia and Russia, want it well into the future in a form capable of stabilizing the oil market and preventing a recurrence of the glut from which their economies suffered quite a lot. A growing production by Nigeria and Libya is already factored in the production cut agreement so its impact on oil prices and the oil market will be hardly noticeable.
As for a faster-than anticipated US shale oil production, its impact on oil prices will be swamped by the bullish sentiments in the market.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
at the World Bank have no hard core actual working experience in the oil industry and do not appear to know much about the cyclicality of oil prices either. If they did, then they would know that oil prices swing both up and down in a constant long term cycle. The prior down cycle finished in February of 2016 and we are currently in a very bullish long term upward price cycle that I forecast will last for many more years yet. Enjoy the ride on the upside everyone!
If so, I challenge you and all other doubters to go short on the oil market and hold your short sales until January 2020 when I predict the WTI oil price will hit $100.00 per barrel. So it appears that younger inexperienced readers here on OILPRICE.COM such as maybe yourself, may not yet believe that $100.00 per barrel oil is possible. Well I am a retired former stockbroker who has seen many economic cycles come and go over my life and I actively trade these economic price wave cycles in the market for my own account using my own money. I trade the oil market along with other markets as well and wish to point out to all doubters of my forecasts that the crude oil price has indeed already traded well over $100.00 per barrel going back as far as the year 2008. I have studied the oil market for many decades and I wish to point out that the oil hit a high price of $146.73 in July of 2008. Indeed in total there were ten months in 2008 when oil traded over $100.00. Also in the period from February of 2011 to July of 2014, there were a total of 22 months were oil traded above $100.00 with a high of $114.80 in May of 2011. Please do verify these figures by looking over a long term oil price chart for yourself and you will see that I am correct on these past historical prices. So if it has already happened in the past, then it could also very well happen again sometime in the future. My technical analysis studies say that it will and oil is currently now already well under way to hit $100.00 by 2020.
Now you are right in thinking that a economic recession will occur in the next few years as I believe that is now already "baked in the cake" with the double whammy effect of now rising interest rates and higher $100.00 future crude oil prices. In fact this looming recession may very well have already started in January of 2018. That may very well turn out to be the high water mark in the stock market for that economic cycle and the future is all down hill for most stocks for very many years yet to come. Only time will tell if this analysis is correct or not as there may still be some more time left yet for the stock market to run but I do believe the stock market's days are indeed numbered. It is only a matter of time now before the looming recession sets in in earnest.