2015 energy prices to be 39% lower than 2014

The bank said it expects the price to rise to $61/b in 2016 as supply growth slows. Energy prices rose twelve percent in the first quarter, thanks to an increase in oil prices which offset losses in natural gas and coal.

The bank expects that the average oil price this year of $ 57 a barrel while the forecast three months ago, $ 53 a barrel, at the same time, the expected price of oil this year, at least 39% from the average price last year.

“Large inventories and rising output from OPEC members suggest prices will likely remain weak in the medium-term”, said John Baffes, Senior Economist and lead author of the report.

The World Bank pointed to an Iran nuclear deal and higher-than-expected non-OPEC production as risks to the forecast, though geopolitical tensions and the closure of high-cost operations could provide upside.

It noted that the US rig count is down 60% since its November high, but oil production continues to grow more than 1 million b/d year on year.

In a special feature assessing the roles played by China and India in global commodity consumption, the Outlook finds that demand from China and, to a lesser extent, India, over the last two decades significantly raised global demand for metals and energy-especially coal-but less so for food commodities. The bank said that metals and coal consumption in particular may slow in China as the nation shifts to a more services-oriented economy and enacts policies to curb pollution.

Steel output is down in China, where half the world’s steel is produced, and little growth is anticipated.

As indicated by the Bank, whereas the global market recorded a two per cent decline in prices for the quarter with the exclusion of energy, non-energy prices would average 12 per cent below 2014 levels this year.

“The largest decline is for iron ore, expected to fall by 46% due to significant increases in new capacity from Australia and Brazil, followed by tin prices falling 30%”. Iron ore prices will decline by an average 40 per cent in 2015. Markets will eventually tighten, in part due to large zinc mines closures, and as Indonesia’s ore export ban weighs on supplies, notably nickel.