KUALA LUMPUR (Oct 23): The World Bank forecasted crude oil prices to average US44 (RM182.45) a barrel in 2021, up from an estimated US$41 in 2020.

In its Commodity Markets Outlook yesterday, the bank said crude oil prices had doubled since their April low, supported by sharp oil supply cuts, but prices remained one-third lower than pre-pandemic.

It said the main risk to its price forecasts is the duration of the Covid-19 pandemic, including the risk of an intensifying second wave in the Northern Hemisphere.

The bank said the pandemic has had the largest impact on energy prices.

After plunging in March and April, energy prices had seen a partial recovery, driven by crude oil prices, it said.

However, the bank said the recovery stalled recently amid concerns about renewed Covid-19 infections and their impact on oil consumption.

The World Bank said oil prices are expected to remain close to current levels into next year, staying well below pre-pandemic benchmarks. 

In contrast, metal and agricultural commodities have recouped their losses from the Covid-19 pandemic, and are expected to make modest gains in 2021.

The bank said a collapse in oil consumption in March and April triggered a sharp fall in oil prices. 

It said that in response, many oil producers cut production, most notably the Organization of the Petroleum Exporting Countries (OPEC) and its allies who collectively agreed to production cuts of 9.7 million barrels per day — almost 10% of global output.

The combination of production cuts and a pickup in consumption helped oil prices partially recover in the third quarter of 2020 (3Q20), it said.

Meanwhile, it said air travel may see a permanent reduction as business travel is curtailed in favour of remote meetings, reducing demand for jet fuel.

The bank said a shift to working from home could reduce gasoline demand, but this may be offset by increased use of private vehicles if people remain averse to using public transport.