KUALA LUMPUR (April 27): Improving market sentiment and the weakening dollar have made World Bank raise its 2016 forecast for crude oil prices to US$41 from US$37 per barrel in a quarterly report published yesterday.

In its latest commodity market outlook, the World Bank said while a proposed production freeze by major oil producers failed to materialise at the Doha meeting on April 17, production disruptions in Iraq and Nigeria as well as a decline in non-OPEC production contributed to the market rebounding from a low US$25 per barrel in mid-January to US$41 per barrel in April.

World Bank senior economist John Baffes noted that higher prices for energy commodities over the course of the year could be expected as markets rebalance after a period of oversupply.

He said all main commodity indexes tracked in the report are expected to decline in 2016 from the previous year, adding that energy prices are due to fall 19.3% while non-energy commodities are expected to drop 5.1%. This is a downward revision from the 3.7% projection in January.

Compared to the 10.2% forecast drop in January, metal prices are due to decline 8.2% in the coming year, reflecting expectations of stronger demand growth by China. Agricultural prices are forecasted to fall more than projected in January due to a favourable harvest year as well as low energy costs.

Baffes cautioned that disappointing growth due to low commodity prices may cause debt-laden countries to struggle to service their debt and sustain investment, especially for those that borrowed anticipating faster growth.