World Bank lowers crude forecast to $52/bl
Energy prices overall in the third quarter were 17pc lower than the second quarter, the World Bank said today in its Commodity Markets Outlook. The quarterly report said average prices of crude, natural gas and coal this year will likely be 43pc lower than they were in 2014, with only a "modest recovery" next year.
The fall in world crude prices in the third quarter was most severe, the World Bank said, falling by 19pc to $48.8/bl. That price is about half of what it was in 2014, a reduction that occurred even as world demand increased by an estimated 1.9mn b/d over the first nine months of 2015.
Part of this price decline comes from expectations that Iranian crude exports will rise after the US and other countries implement a deal in the first half of 2016 to lift sanctions in exchange for nuclear concessions. After that occurs, the report said Iran can immediately begin exporting about 40mn bl of crude and condensate it has in floating storage. A few months later, the report said Iran could boost production by 0.5-0.7mn b/d to pre-sanctions level of 3.6mn b/d.
Natural gas prices were 3pc lower in the third quarter, the report said, as prices dropped by 6pc in Europe to $6.9/mmBtu. delivered gas prices in Japan fell by 2pc to $9/mmBtu and US gas prices stayed nearly flat at $2.75/mmBtu. Overall gas prices in the third quarter were nearly 30pc lower than the same period in 2014, the report said, and should "remain weak" because of surplus supply, weak demand and low crude prices.
Thermal coal prices fell by 3pc in the third quarter to a four-year low, the report said, driven by high stockpiles, surplus supply and weak demand. The World Bank expects coal prices throughout 2015 will decline by 17pc to an average of $50/t and will continue to face challenging market conditions because of slowing imports from China, competition from low-cost natural gas and the growth of carbon-trading programs that curtail coal usage.
The US Treasury in a separate report released yesterday said the recent drop in crude prices, to $55/bl in the first half of 2015 from $105/bl in the same period in 2014, has caused a "meaningful shift" in income from oil-exporting economies to oil-importing economies that is likely to continue for the remainder of the year.
China's savings from this crude price drop were $120bn in the first half of this year, while the US saved nearly $110bn and the Eurozone area saved nearly $142bn. Saudi Arabia for comparison lost $150bn in oil export earnings in the first quarter, the report said, while Russia lost $100bn in the first half of 2015.
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