The World Bank ups its forecast for crude oil prices ahead of OPEC’s November meeting
The World Bank increased its forecast for crude oil prices next year to $55 per barrel from $53 as members of OPEC prepare to establish a production cap.
The recovery in crude oil prices is expected to lead a wider recovery in the price of other energy sources including natural gas and coal, according to the World Bank.
“Energy prices … are projected to jump almost 25% overall next year, a larger increase than anticipated in July,” the organization said. The bank’s estimates for crude oil prices this year remained unchanged with the organization calling for crude prices to average $43 per barrel.
“We expect a solid rise in energy prices, led by oil, next year,” said Senior Economist and lead author of the World Bank’s Commodity Markets Outlook John Baffes. “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.”
News of OPEC’s potential production deal has impacted oil prices significantly. Oil prices jumped more than $3.00 when OPEC first said it would look to limit production to 32.5-33.0 MMBOPD, but it remains to be seen if the group will be able to come to an agreement. The potential for a production freeze from OPEC at the beginning of the year had a similar positive effect on prices, but fell apart when Iran refused to limit its production to levels below those seen prior to international sanctions.
This time, however, OPEC appears ready to make exceptions for producers like Iran, Libya and Nigeria, which are trying to increase production. OPEC is expected to decide on quotas during its next meeting at the end of November.
