The World Bank said in a report released this month that world oil prices will be lower for longer due to an imbalance between supply and demand until the end of the decade.
“Taking into account the trajectory of futures oil prices and consensus forecasts, it appears that the market will not rebalance at least until 2020,” the World Bank said. “When it does so, the market-clearing price will be in the range of $53 to $60 a barrel.”
The revised forecast is in line with recent projections from the IMF. Earlier this month, its Article IV report on the UAE forecast that the average export price of UAE oil would $52.6 a barrel in 2017 and only $58.4 a barrel in 2020.
The fund’s forecast for the UAE export price in 2020 was 22 per cent lower than in its 2015 Article IV report published in July 2016.
The World Bank’s report says that the forecast range of $53-$60 a barrel by the end of the decade. “…is probably the new normal oil price that is high enough to ease pressure on some of the oil producers, particularly the US shale oil companies, and low enough to keep them from drilling more.