Lower Forecast Price for Oil and Commodities
By admin October 22, 2015



On Tuesday, the World Bank (WB) lowered its 2015 forecast for crude oil prices, as well as other key commodities in the Bank’s latest commodity updates. This revised forecast indicates and may reflect that global economic performance might further slow down.

Although the U.S. and global economies are improving, it appears to be not enough to draw on the surplus of oil in storage. Senior Economist and lead author of Commodity Markets Outlook, John Baffes said that, “There are sufficient inventories of oil and other commodities and demand is weak, especially for industrial commodities, which is why prices may stay persistently low.” For instance, the crude oil price is revised from $57 per barrel in the WB’s July report to $52 per barrel in the most recent report, due to the concern of high current oil inventories, and the expectations that Iranian oil exports would rise after the lifting of international sanctions. Meanwhile, the World Bank also lowered the price of commodities, especially industrial commodities. Two main reasons behind the commodities price revision are the sufficient inventories of goods and the weak global demand.

Iran has the largest known gas global reserves, which accounts for 18% of the world total, giving the country huge potential to produce and export a significant amount of natural gas, over a very long period of time. The uncertainties of Iran’s production have added risks to the oil price forecast. If OPEC countries produce more oil than it had expected, and the U.S. shale oil industry improved its productivity due to continuing falling costs, the energy price will drop. The upside risks might include the U.S. shale oil output declining, or the oil supply reduced due to geopolitical events. Technical experts from members states of Organization of Petroleum Exporting Countries are going to meet again in Vienna to discuss the current market dynamics.

A drop in oil price could be a blessing for oil import countries, as they would save a lot of money, while imposing pressures and risks on the big oil producers and exporters.

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