World Bank projects oil, gas prices to remain weak

…Prices fall to lowest in six months

The global energy market may not heave a sigh of relief from the plunging crude oil and gas prices soon, going by the indications from the World Bank.

The bank, in its latest report on the state of the international commodity markets projected that energy prices would average 39 per cent this year, below 2014 levels.

Specifically, the World Bank nudged up its 2015 forecast for crude oil prices from $53 in April to $57 per barrel after oil prices rose 17 per cent in the April-June quarter.

It stated that energy prices rose by 12 per cent in the quarter, with the surge in oil offset by declines in natural gas (down 13per cent) and coal prices (down four per cent).

The report obtained by The Guardian showed that natural gas prices are projected to decline across all three main markets, United States (US), Europe, and Asia, and coal prices would fall by17 per cent this year.

Excluding energy, the World Bank reports predicted two per cent decline in prices for the quarter and projected that non-energy prices will average 12 per cent below 2014 levels this year.

Senior Economist and lead author of Commodity Markets Outlook, John Baffes, said: “Demand for crude oil was higher than expected in the second quarter. Despite the marginal increase in the price forecast for 2015, large inventories and rising output from OPEC members suggest prices will likely remain weak in the medium-term,”

Meanwhile, oil prices fell to their lowest in nearly six months on Tuesday, as a rout in the Chinese stock market cast further doubt over the outlook for crude demand in the world’s top commodities consumer.

China’s already-volatile benchmark stock index, with a combined market capitalization of $4.6 trillion, has lost 10 per cent in the last two days of trade.

Brent was down 72 cents at $52.75 a barrel by 1054 GMT, having hit a session low of $52.28, its lowest since early February, bringing the losses for July to nearly 18 per cent.

Brent crude is on track for its longest stretch of daily losses since March, when the price hovered just dollars away from six-year lows. U.S. crude was last down 33 cents at $47.06 a barrel after ending the previous session down 75 cents.

However, the Organization of the Petroleum Exporting Countries (OPEC) said it intends to continue its current output levels in order to defend its market share.

While oil prices have dropped again this month, a number of OPEC delegates have reportedly said that they expect the drop to be short-lived and hold expectations for stronger future demand.

Kuwait’s oil minister, Ali Saleh al-Omair, has been quoted as saying that producer countries expect stronger global economic growth to raise oil prices.