The World Bank is spiking its 2016 forecast for crude oil prices from $41 to US$43 per barrel following supply outages and heavy demand in the second quarter of the year.
Oil prices climbed 37 percent in the second quarter, largely on the back of supply disruptions, particularly those caused by wildfires in Canada and sabotage of oil infrastructure in Nigeria.
The revised forecast appears in the World Bank’s latest Commodities Markets Outlook and takes into account a recent dwindling in demand and the recovery of some disrupted supply.
Senior economist and lead author of the Commodities Markets Outlook,John Baffes, said: “We expect slightly higher oil prices for the second half of 2016 as oil market oversupply diminishes. However, inventories remain very large and will take some time to be drawn down.”
The World Bank’s forecast was in line with the report of PTT Plc, the national oil and gas conglomerate, which also anticipates the average oil price will move in the range of $42-$48 a barrel this year.
PTT’s executive vice-president overseeing oil business, Saran Rangkasiri, said he also expected the average oil price to rebound slightly this year.
Due to the sluggish global economic outlook, however, PTT said it is unlikely for the price of oil to break the $50 threshold this year.
Siam Commercial Bank’s Economic Intelligence Center (SCB EIC), citing a surplus in supply, has projected global oil prices to stay at $43-$45 a barrel in the third quarter.
This lines up with the view of Kasikorn Research Center, which recently predicted excess supply from the Organization of Petroleum Exporting Countries.
Post-sanctions Iran, for example, is expected to export more oil, while Saudi Arabia has vowed to retain its global market share amid fierce competition from US shale oil.
With oil prices forecasted to remain relatively low, oil and gas exploration companies are likely to put a hold on investment for new exploration.