The World Bank does not see oil prices rising sharply in the long term, although the current OPEC/non-OPEC output cut deal provides some stability for the short term, the World Bank's chief executive officer Kristalina Georgieva told Russia's news agency TASS in an interview on Friday.
"We should accept that the prices will be more or less within the current range. Oil producers should adjust to it," TASS quoted Georgieva as saying.
The World Bank's chief went on to add:
"In my opinion, it is quite clear why the price won't grow - because oil production technology has strongly diversified. More options, new production technologies emerged. Plus alternative energy sources are developing."
In its latest Commodity Markets Outlook from April, the World Bank maintained its Q1 forecast for oil prices at US$55 a barrel for 2017, saying, however, that overall energy prices will increase 26 percent in 2017.
The World Bank was overall optimistic for oil, expecting supply to tighten in the second quarter as OPEC and non-OPEC production cuts start to affect global supply.
Based on this optimism, the World Bank expects crude oil prices to reach US$60 a barrel next year - the price level that Middle Eastern producers would like to see sooner rather than later. Oil is unlikely to go much higher than this, however, the World Bank argued-shale output increases will limit the upward potential of prices.
While analysts and international agencies are mostly concurring about the oil price levels this year, they have various, contrasting opinions about where the price of oil would be just three years from now, in 2020. The IEA, for example, has been warning for months of a supply crunch, hence, a sharp rise in oil prices, due to the fact that reduced investments in the downturn have led to the lowest point of the new discoveries curve in 70 years.
By Tsvetana Paraskova for Oilprice.com
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OPEC must cut overheads.