World Bank forecasts higher oil price in 2018

The price of oil is forecast to increase to $56 (£42.8) a barrel next year. The $3 (£2.3) a barrel increase is a result of steadily growing demand, agreed production […]

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By Priyanka Shrestha

The price of oil is forecast to increase to $56 (£42.8) a barrel next year.

The $3 (£2.3) a barrel increase is a result of steadily growing demand, agreed production cuts among oil exporters and stabilising shale production in the US, according to the World Bank.

The forecast is however a small downward revision from its April outlook.

The Bank says supplies from producers such as Libya, Nigeria and Venezuela could be volatile and members of the Organisation of Petroleum Exporting Countries (OPEC) and other producers could agree to cut production further, maintaining upward pressure on prices.

However, failure to renew the agreement could drive prices down, as could increased production from the US shale oil industry.

The price of natural gas is forecast to rise 3% next year while coal prices are forecast to fall following a climb of nearly 30% this year. The Bank anticipates China’s environmental policies to be a key factor in determining future trends in coal markets.

Its outlook forecasts prices for energy commodities, which include oil, natural gas and coal, will climb 4% in 2018 after a 28% jump this year.

John Baffes, Senior Economist and Lead Author of the Commodity Markets Outlook said: “Energy prices are recovering in response to steady demand and falling stocks but much depends on whether oil producers seek to extend production cuts.”