The World Bank has updated its forecast for oil next year. The bullish World Bank oil outlook indicates a surge up to $55 per barrel. On what grounds did the world bank adjust its forecast upwards?
21 October, AtoZForex – According to the bullish World Bank oil outlook for 2017, prices increase from $53 to $55 per barrel, on the back of optimism for an OPEC oil output agreement. After a long period of unrestrained production, members of the Organisation of the Petroleum Exporting Countries (OPEC) are preparing to limit the output.
Almost 25 percent increase in energy prices, including oil, natural gas and coal, is expected next year, which is a larger increase than anticipated in July. The World Bank’s latest Commodity Markets Outlook covers the revised forecast. In 2016, the expected average price per barrel is $43, matching the July report.
Uncertainty over the first OPEC oil output cut since 2008
Senior Economist and lead author of the Commodity Markets Outlook John Baffes commented “We expect a solid rise in energy prices, led by oil, next year. However, there is considerable uncertainty around the outlook as we await the details and the implementation of the OPEC agreement, which, if carried through, will undoubtedly impact oil markets.”
OPEC plans to decrease production to 33.0 million barrels per day (bpd) from 32.5 million, which will be their first output cut since 2008. In September, output record was 33.6 million bpd.
What are Energy Ministers’ opinions?
OPEC’s top producer Saudi Arabia’s energy minister Khalid al-Falih stated that fundamentals were improving, supply and demand were rebalancing, thus oil markets were at the end of a considerable downturn.
Russian energy minister Alexander Novak stated that he would make proposals to his Saudi Arabian counterpart to arrange an oil production freeze agreement as it was needed to prop up prices.
Nigeria’s finance minister said he hoped oil prices will be maintained in a range of $42 to $50 per barrel. Boosting economies is accomplished if crude prices increased, that’s why oil-producing companies are hoping for this increase. Despite, the bullish World Bank’s 2017 oil forecast, the market will be focussing on the OPEC oil output deal between OPEC and non-OPEC members.
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