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WB Releases Report on  Commodity Markets Outlook
WB Releases Report on  Commodity Markets Outlook

WB Releases Report on Commodity Markets Outlook

A modest recovery is projected for most commodities as demand strengthens and supplies tighten

WB Releases Report on Commodity Markets Outlook

The World Bank is raising its 2017 forecast for crude oil prices to $55 per barrel from $53 per barrel as members of the Organization of the Petroleum Exporting Countries prepare to limit production after a long period of unrestrained output.
Energy prices, which include oil, natural gas and coal, are projected to jump almost 25% overall next year, a larger increase than anticipated in July. The revised forecast appears in the World Bank’s latest Commodity Markets Outlook. Oil prices are expected to average $43 per barrel in 2016, unchanged from the July report, a World Bank report says.
 “We expect a solid rise in energy prices, led by oil, next year,” said John Baffes, senior economist and lead author of the report. “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.”
Focus of OPEC
This edition of the Commodity Markets Outlook contains a Special Focus analyzing OPEC’s recent announcement of plans to limit production.
Historically, agreements aimed at influencing the prices of commodities such as tin and coffee have succeeded in swaying markets for a time but eventually lost that ability and collapsed.
OPEC’s ability to affect oil prices is likely to be tested by the expansion of oil supply from unconventional sources, including shale producers.

Metals
A modest recovery is projected for most commodities in 2017 as demand strengthens and supplies tighten.
Metals and minerals prices are expected to rise 4.1% next year, a 0.5 percentage point upward revision due to increasing supply tightness. Zinc prices are forecast to rise more than 20% following the closure of some large zinc mines and production cuts in earlier years.
Gold is projected to decline slightly next year to $1,219 per ounce as interest rates are likely to rise and safe haven buying ebbs.

Agriculture
Agriculture prices are expected to increase 1.4% in 2017, slightly less than expected in July, as food prices are projected to climb more gradually than anticipated (1.5%) and beverage prices are seen dropping by a greater extent (0.6%) on expectation of a large coffee output. Among food prices, grains prices are forecast to rise a steeper-than-anticipated 2.9% next year, while oils and meals prices are anticipated to rise a slower-than-expected 2%.
“Low commodity prices hit commodity-exporting emerging and developing economies hard but now appear to have bottomed out,” said Ayhan Kose, Director of the World Bank’s Development Prospects Group.
“Growth in this group of economies is expected to be near zero for the year. Where feasible, policymakers should pursue growth-enhancing strategies, such as investments in infrastructure, health and education, in the context of a credible medium-term fiscal plan.”

Pollution
The cost of mitigating climate change could be reduced by almost a third by 2030 through greater cooperation via carbon trading, the report said.
The analysis, prepared with technical support from consultancies Ecofys and Vivid Economics, found an expanded international carbon market could enable large-scale emissions reductions at a far lower cost than is currently the case.
By 2050, the international market has the potential to reduce global mitigation costs by over a half, the report calculated.
It also argued it would be difficult for the world to hit a 2C or lower target cost-efficiently without a significant expansion of carbon trading schemes.
Over 100 countries considered carbon pricing schemes as part of their national climate pledges submitted ahead of the Paris summit, including emissions trading schemes that operate inside or across borders and direct carbon taxation policies.
The report found momentum on carbon pricing has continued to grow post-Paris, with 40 national jurisdictions—including seven of the world's 10 largest economies—now putting a price on carbon, alongside over 20 cities, states, and regions.
In addition, governments raised around $26bn in revenues from carbon pricing initiatives around the world in 2015, a 60% increase on the revenues raised in 2014, the report found, potentially providing an additional source of capital for investment in low carbon infrastructure.
The World Bank’s Commodity Markets Outlook is published quarterly, in January, April, July and October.

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