The World Bank expects oil prices to average $65 a barrel over 2018, increasing from $53 a barrel in 2017. This will be caused by strong demand from consumers and a simultaneous restraint by oil producers. Metals prices are expected to rise 9% in 2018, because of the same reasons.
Prices for energy commodities, including oil, natural gas, and coal, will increase by 20% this year. Namely, oil will average $65/bbl over 2019 as well. This will happen despite a projected to decline from April 2018 levels, as the prices should be supported by continued production restraint by OPEC and non-OPEC producers and strong demand.
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This forecast however comes with some risks as well. These regard potential constraints to US shale oil output, geopolitical risks in many producing countries, and concerns that the US may not waive sanctions against Iran. Further risks include weaker compliance with the oil producers’ agreement to restrain output, rising output from Libya and Nigeria, and a quick rise in shale oil output.
The World Bank also focuses on oil-exporting economies after the 2014 oil price collapse. it says that the oil price decrease damaged oil-related revenues, cutting government spending that was helping the slowdown in private sector activity in many regions. Income inequality and political instability also weakened the ability of some oil-exporting economies to deal with low oil prices.
Ayhan Kose, director of World Bank’s Development Economics Prospects Group, explained:
Oil exporters with flexible currency regimes, relatively large fiscal buffers, and more diversified economies have fared better than others since the oil price collapse. However, most oil exporters still face significant fiscal challenges in the face of revenue prospects that have weakened since 2014.
