World Bank downgrades oil price forecast for 2020

US, WASHINGTON (ORDO NEWS) — The World Bank ( WB ) has worsened its forecast for the average oil price this year to $ 35 per barrel compared with the October forecast of $ 58, the WB report said.

“Oil prices are forecasted to average $ 35 per barrel in 2020, followed by a recovery to $ 42 per barrel in 2021, which is significantly lower than our October forecast of $ 58 per barrel and $ 59 per barrel,” in the document.

The decrease in the WB forecast is explained by the situation around the coronavirus pandemic. “COVID-2019 caused a massive drop in commodity prices in February and March, and the cost of energy was most affected. Oil prices were under pressure due to a fall in the transport sector, weaker economic growth, despite the reduction in OPEC and its oil partners,” said the WB.

The OPEC + March 6 countries were unable to agree either to change the parameters of the agreement to reduce oil production, or to extend it. As a result, from April 1, restrictions on production in the member countries of the former alliance were lifted.

This caused a collapse in the oil market, which overlapped with a sharp global drop in demand due to the coronavirus pandemic. OPEC + agreed on April 12 to reduce oil production by 9.7 million barrels per day in May-June, 7.7 million in the second half of the year and 5.8 million further until the end of April 2022.

Earlier this week, oil prices fell again, on Monday the price of US WTI crude oil for May delivery reached a negative value, on the New York Mercantile Exchange (NYMEX) the price of May futures for WTI reached minus $ 40.32 per barrel. June futures for oil also fell in price on Tuesday: WTI oil fell to $ 6.55 per barrel, Brent price fell below $ 18. On Thursday, prices recovered to about $ 18 and $ 23 per barrel, respectively.

The World Health Organization on March 11 announced an outbreak of a new coronavirus infection COVID-19 with a pandemic. According to the latest WHO data, more than 2.47 million cases of infection have been recorded in the world, over 169 thousand people have died.

Coronavirus and related quarantine measures adversely affect global demand and trade, as well as transportation and tourism. Analysts expect a decline in the global economy this year, which negatively affects estimates of oil demand amid concerns over oversupply.

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