World Bank revises down forecast of oil pricesWashington: The World Bank today lowered its 2015 forecast for crude oil prices from USD 57 per barrel in its July report to USD 52 per barrel, a development that could bring in additional savings
Washington: The World Bank today lowered its 2015 forecast for crude oil prices from USD 57 per barrel in its July report to USD 52 per barrel, a development that could bring in additional savings to the Indian treasury.
Bank's quarterly Commodity Markets Outlook said the revised forecast reflects a further slowing in global economic performance, high current oil inventories and expectations that Iranian oil exports will rise after the lifting of international sanctions.
According to the report, the Bank's Energy Price Index tumbled 17 per cent in the third quarter of 2015 from the previous three-month period, led by a renewed plunge in oil prices prompted by expectations of slower global growth, particularly in China and other emerging markets, abundant supplies and prospects of higher Iranian exports next year.
Energy prices are expected to average 43 per cent lower in 2015 than in 2014.
For commodities excluding energy, the World Bank reports a five per cent decline in prices in third quarter and forecasts that non-energy prices will register a 14 per cent decline in 2015 from the previous year's levels.
"We see a five-year-long slide in most commodity prices continuing in the third quarter of 2015. There are sufficient inventories of oil and other commodities and demand is weak, especially for industrial commodities, which is why prices may stay persistently low," said John Baffes, Senior Economist and lead author of Commodity Markets Outlook.
The Bank said within several months, Iran could increase crude oil production by 0.5-0.7 million barrels per day (mb/d), potentially reaching a 2011 pre-sanctions level of 3.6 mb/d.
In addition, Iran could immediately begin exporting from its 40 million barrels of floating storage of oil, it noted.
Given that Iran has the largest known gas global reserves (18 per cent of the world total), it has the potential to produce and export a significant volume of natural gas over the long term, the Bank said.
"The potential impact of Iranian oil and gas exports on global and regional markets could be large over the long term if Iran can attract the necessary foreign investment and technology to leverage its substantial reserves," said Ayhan Kose, Director of the World Bank's Development Prospects Group.
Uncertainty about Iran's capacity to ramp up exports adds to risks to the energy-price forecast.
Downside risks include higher-than-expected OPEC production and continuing falling costs along with improved productivity of the US shale oil industry. Slowing demand and high stocks could further weigh on oil prices, the Bank said in its report.
Falling crude oil prices is a blessing for India's economy as it helps macro-economic management (both budget and fiscal) by improving macro fundamentals (inflation, fiscal deficit and current account deficit).
India imports more than two-thirds of its oil requirement, which constitutes around 30 per cent of total imports. A fall of one-dollar in the price of oil saves the country about Rs 40 billion.