The World Bank has raised its 2016 forecast for 2016 to $41 per barrel from $37 per barrel in its latest Commodity Markets Outlook, stating that oversupply in markets is expected to recede. This is coming in middle of an improvement and a weakening dollar.
Brent crude futures were up $1.30 or nearly three per cent, at $45.78 a barrel on Tuesday. Oil markets rose about three per cent as a tumbling dollar boosted commodities denominated in the greenback after bets that the Federal Reserve will hold US interest rates where they are.
The crude oil market bounced back from a from its downward trend of $25 per barrel in mid-January to $40 per barrel this month, following a production freeze in Iraq and Nigeria and a decline in non-Organisation of Petroleum Exporting Countries output, mainly US shale.
A proposed production freeze by major producers failed to materialize at a meeting held in Doha, Qatar mid-April.
“We expect slightly higher prices for energy commodities over the course of the year as markets rebalance after a period of oversupply,” senior economist and lead author of the Commodities Markets Outlook, John Baffes, said in the report released yesterday.
“Still, energy prices could fall further if OPEC increases production significantly and non-OPEC production does not fall as fast as expected.”