The World Bank has raised its 2016 forecast for crude oil prices to $41 per barrel from $37 per barrel in its latest Commodity Markets Outlook, as an oversupply in markets is expected to recede.
Amid improving market sentiment and a weakening dollar, the World Bank raised its forecast despite a proposed production freeze by major producers failed to materialise at a meeting in mid-April.
The crude oil market rebounded from a low of $25 per barrel in mid-January to $40 per barrel in April following production disruptions in Iraq and Nigeria and a decline in non-Organisation of the Petroleum Exporting Countries production, mainly US shale.
"We expect slightly higher prices for energy commodities over the course of the year as markets rebalance after a period of oversupply," said John Baffes, senior economist and lead author of the Commodities Markets Outlook.
"Still, energy prices could fall further if OPEC increases production significantly and non-OPEC production does not fall as fast as expected."
All main commodity indexes tracked by the World Bank are expected to decline in 2016 from the year before due to persistently elevated supplies, and in the case of industrial commodities – which include energy, metals, and agricultural raw materials - weak growth prospects in emerging market and developing economies.
Energy prices, including oil, natural gas and coal, are due to fall 19.3 percent in 2016 from the previous year, a more gradual drop than the 24.7 percent slide forecast in January.
Non-energy commodities, such as metals and minerals, agriculture, and fertilisers, are due to decline 5.1 percent this year, a downward revision from the 3.7 percent drop forecast in January.
The drop in oil prices has prompted Gulf crude producers to re-examine their economic policies, with a shift away from their dependence on oil revenues.
Earlier this week, Saudi Arabia announced details of its Vision 2030 reform plan aimed at ending the kingdom's "addiction" to oil and transforming it into a global investment power.For all the latest energy and oil news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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