World Bank: Oil prices likely to rise further in 2018

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Oil prices are forecast to rise to 56 US dollars a barrel in 2018 from 53 dollars this year as a result of steadily growing demand, agreed production cuts among oil exporters and stabilizing US shale oil production, while the surge in metals prices is expected to level off next year, the World Bank said on Thursday.

Prices for energy commodities – which include oil, natural gas, and coal – are forecast to climb four percent in 2018 after a 28 percent leap this year, the World Bank said in its October Commodity Markets Outlook. The metals index is expected to stabilize in the coming year, after a 22 percent jump this year as a correction in iron ore prices is offset by increased prices in other base metals.

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

"Developments in China will play an important role in the price trajectory for metals."

The oil price forecast is a small downward revision from the April outlook and is subject to risks. Supplies from producers such as Libya, Nigeria, and Venezuela could be volatile.

Members of the Organization of the Petroleum Exporting Countries (OPEC) and other producers could agree to cut production further, maintaining upward pressure on prices.

"Investors have confidence in an extension of the agreement (reduction of oil production ) supported by the Prince of Saudi Arabia," said Gene McGillian of Tradition Energy.

Crown Prince Mohammed bin Salman has spoken in favor of an extension beyond March 2018 of an agreement between member countries and non-members of OPEC on a reduction of oil production .

"Yes, of course," the prince replied when asked in a Bloomberg News interview on Wednesday whether Saudi Arabia supported the renewal of the deal.

"It's now as if the extension is acquired," said McGillian.

The cartel and its partners will meet on November 30 in Vienna to discuss an extension of the agreement.

Source(s): AFP