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The World Bank raised its crude oil price forecast for 2017 to $55 a barrel on Thursday from $53 a barrel, as it expects an output agreement among the Organization of the Petroleum Exporting Countries (OPEC) to help trim excess supply.
Energy prices, which include oil, natural gas and coal, are expected to jump nearly 25 percent next year, a larger increase than previously forecast, the World Bank said in a quarterly commodity markets outlook report.
“We expect a solid rise in energy prices, led by oil, next year,” said John Baffes, senior economist at the World Bank.
“However, there is considerable uncertainty around the outlook as we await the details and the implementation of the OPEC agreement, which, if carried through, will undoubtedly impact oil markets.”
In what would be its first output cut since 2008, OPEC plans to limit production to a range of 32.5 million to 33.0 million barrels per day (bpd), compared with record output of 33.6 million bpd in September.
The bank left its forecast of an average of $43 per barrel crude oil in 2016 unchanged.
OPEC top producer Saudi Arabia’s energy minister Khalid al-Falih said on Wednesday that oil markets were at the end of a considerable downturn as fundamentals were improving and supply and demand were rebalancing.
One of the largest crude gluts in a generation has roiled the global oil market for more than two years, with prices crashing from the $100 level in 2014 to as low as $27 a barrel earlier this year.
However, prices have since steadied at around $50 a barrel, in part due to a decline in non-OPEC production and supply outages in some OPEC countries.
A modest recovery is projected for most commodities, including metals and agricultural prices, in 2017, as demand strengthens and supplies tighten, the bank said.
Gold prices are projected to decline slightly next year to $1,219 per ounce as interest rates are likely to rise and safe-haven buying ebbs, according to the report.
The yellow metal is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced.
On Thursday, spot gold was up about 0.3 percent while oil prices fell 2 percent, pressured by a stronger dollar.