The World Bank cut its 2016 oil price forecast to $37 per barrel in its quarterly report released today, from $51 outlined in October.
The Washington-based organisation cited Iran’s return to the market, alongside the increased resilience of the US shale gas industry. On the demand side, it pointed to warm weather in the Northern Hemisphere and weak growth prospects in major emerging market economies.
It said oil prices declined around 47 per cent in 2015, and they are now expected to fall by another 27 per cent this year.
“Low prices for oil and commodities are likely to be with us for some time,” John Baffes, senior economist and lead author of the commodities market outlook, said.
“While we see some prospect for commodity prices to rise slightly over the next two years, significant downside risks remain.”
While the World Bank expects oil prices to recover from their current lows over the course of this year, it cautioned that the rebound will be less than those which followed sharp drops in 2008, 1998 and 1986.
It added that market fundamentals don’t justify the sell-off since the beginning of this this year.
Downward pressure will also ease as high-cost producers are forced to make production cuts, and global growth picks up modestly.