A NEW World Bank Commodity Outlook report shows that crude oil is expected to average at USD 66 a barrel in 2019 and USD 65 a barrel in 2020, lower than the October projections (by $8 a barrel and $4 a barrel respectively).
The report singles out the weaker expected global economic growth in 2019 and increased production of oil by non OPEC member as the major factors that are leading to this fall in price.
The Bank argues that though the production cuts of OPEC members are expected to continue throughout 2019 coupled with anticipated strengthening demand in 2020 it will be enough to shake off the effect of soaring US shale production.
The report analysis showed that the impact of April 22 US administration decision to terminate waivers to its sanctions on the Islamic Republic of Iran remains uncertain based on the earlier actions of several countries that continued to buy oil from Iran above the threshold stipulated by sanctions agreement.
The report adds that it’s not clear yet how countries will quickly comply with the removal of wavers and also that countries like China have been buying more oil from Iran above the quantity allowed under waivers provision.
Meanwhile, the report also suggested that agriculture prices are to remain low with 2.6 per cent below the 2018 prices but in 2020 a recovery is expected due to lower crop production and higher costs of energy and fertilizers.
The report shows that the drop in crop production will be much concentrated in Central America, the Caribbean and South Africa due to the increased frequency of extreme weather events and the increasing the price of fertilizers which have a direct impact on the agriculture prices.
The report said that the increase in agriculture prices will push up food prices which always raise poverty, reduced nutrition, and curtail the consumption of essential services education and healthcare as majority income goes to food consumption.
The report said that the governments in these countries have to come up with well-designed and tailored insulation policies to prevent what escalation.