WASHINGTON,
October 20, 2015 –In its
latest commodity update, the World Bank is lowering its 2015 forecast
for crude oil prices from $57 per barrel in its July report to $52 per
barrel. The revised forecast reflects a further slowing in global economic
performance, high current oil inventories, and expectations that Iranian
oil exports will rise after the lifting of international sanctions,
according to the Bank’s new Commodity Markets Outlook,
a quarterly update on the state of the international commodity markets.
The Bank’s Energy Price Index tumbled 17 percent
in the third quarter of 2015 from the previous three-month period, led by
a renewed plunge in oil prices prompted by expectations of slower
global growth, particularly in China and other emerging markets, abundant
supplies, and prospects of higher Iranian exports next year. Energy prices
are expected to average 43 percent lower in 2015 than in 2014. For
commodities excluding energy, the World Bank reports a 5 percent decline
in prices in Q3, and forecasts
that non-energy prices will register a 14 percent
decline in 2015 from the previous year’s levels.
“We see a
five-year-long slide in most commodity prices continuing in the third
quarter of 2015. 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,”said John Baffes, Senior Economist and lead author of
Commodity Markets Outlook.
Impact of El
Niño on commodity markets
Despite expectations of one of the strongest El Niño
episodes on record, the weather pattern, which affects winds and water
temperatures of the Pacific Ocean and changes precipitation levels, especially
in the Southern Hemisphere, is unlikely to cause a spike in global agricultural
prices because of ample supplies of most agricultural commodities and weak
links between global and domestic prices.
This is consistent with the limited impact on
global markets of past El Niño episodes. To date, global
agricultural prices have declined while those of key domestic markets have
not shown large deviations from trends due to El Niño.
However, El Niño could be a source of significant
local disruptions in the most affected regions, the Outlook says. In
particular, the weather pattern is likely to have a greater impact on more
isolated local food markets, which are not linked to international markets.
Possible effects
of the Iran Nuclear Agreement on global energy markets.
Within several months, Iran could increase crude oil
production by 0.5-0.7 million barrels per day (mb/d), potentially reaching a
2011 pre-sanctions level of 3.6 mb/d. In addition, Iran could immediately begin
exporting from its 40 million barrels of floating storage of oil.
Given that Iran has the largest known gas global
reserves (18 percent of the world total), it has the potential to produce and
export a significant volume of natural gas over the long term.
“The potential
impact of Iranian oil and gas exports on global and regional markets could be
large over the long term if Iran can attract the necessary foreign investment
and technology to leverage its substantial reserves,” said Ayhan Kose, Director of the World Bank’s Development
Prospects Group.
Uncertainty about Iran’s capacity to ramp up
exports adds to risks to the energy-price forecast. Downside risks include
higher-than-expected OPEC production and continuing falling costs along with
improved productivity of the U.S. shale oil industry. Slowing demand and
high stocks could further weigh on oil prices. Upside risks include: an
accelerating decline in U.S. shale oil output, and reduced supply because of
geopolitical events.
The Outlook provides detailed market analysis for
major commodities groups, including energy, metals, agriculture, precious
metals, and fertilizers. According to the report:
·
Metals prices
fell 12 percent in Q3, the fourth consecutive quarterly
decline, reflecting slowing demand, notably from China. The World Bank
projects metals prices to fall by 16 percent in 2015.
·
Precious metals
prices fell 7 percent in Q3 and are likely to slide another 8 percent
in 2015 on lower investment demand.
·
Agricultural commodity
prices fell by more than 2 percent in the quarter and are likely to fall
by 13 percent in 2015, reflecting abundant supplies and high levels of
existing grain stocks.
·
Fertilizer prices
fell 1 percent in Q3, and may decline by 1 percent in 2015, because
of weak demand, and rising supply.
Full forecast and
historical data, and detailed market commentary, are available at www.worldbank.org/commodities.
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