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The World Bank warns of oil prices rising above $150
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Economy News _ Baghdad
The World Bank fears that global oil prices will ignite if the conflict expands in the Middle East, with Israel insisting on launching more attacks on the Gaza Strip and not responding to UN ceasefire calls and appeals from international humanitarian and human rights institutions to stop the war that has been going on for 23 days.
The report warned of the danger of the escalation of the recent conflict in the Middle East and its potential effects on the global economy and the prices of energy and primary commodities.
The Commodity Market Outlook report, issued by the World Bank, charted 3 possible scenarios in which oil prices would rise to varying degrees depending on the degree of escalation of the conflict and its effects on regional and global oil supplies, according to the Energy Research Unit.
Although the global economy is in a much better position than it was in the 1970s, enabling it to face a major shock in crude prices, the conflict in the Middle East and Israel’s continued attacks on the Gaza Strip, in addition to the unrest resulting from the Russian invasion of Ukraine, may push... Global commodity markets are in a state of uncertainty.
Short-term oil price forecasts
The impact of the conflict on global commodity markets remains limited so far, as oil prices have risen by 6% since the beginning of the Gaza war on October 7, 2023, while the prices of agricultural commodities and most metals and other primary commodities have not suffered a clear impact..
The World Bank report prepared a preliminary assessment of the potential repercussions of the conflict in the Middle East on commodity markets in the short term.
The World Bank's baseline forecast for average oil prices is $90 per barrel in the current quarter of 2023, before falling to $81 in 2024, as the pace of global economic growth slows.
It is also expected that basic commodity prices will decline by 4.1% next year, accompanied by a decline in agricultural commodity prices as their supplies increase, and a decrease in metal prices by 5%, before stabilizing in 2025.
3 scenarios for oil prices
The World Bank expects that commodity prices will be quickly affected if the conflict in the Middle East escalates, which threatens the price of oil with varying increases, according to 3 possible scenarios for interruption of oil supplies based on previous historical experiences that the world has gone through since the 1970s.
The effects of each scenario depend on the degree of shortage or disruption of oil supplies and the subsequent effects on crude prices, as global oil supplies are expected to decrease in the “limited disruption or disruption” scenario, to a range between 500 thousand to two million barrels per day, equivalent to a decrease in The world witnessed it during the Libyan civil war in 2011.
Based on this scenario, oil prices could rise between 3% and 13% to a range of $93 to $102 per barrel, compared to average prices during the current quarter near $87 per barrel.
In the “moderate disruption” scenario, global oil supplies could shrink by between 3 million and 5 million barrels per day, equivalent to the size of the decline during the US invasion of Iraq in 2003.
If this scenario occurs, global oil prices will rise between 21% and 35%, ranging from $109 to $121 per barrel, according to detailed estimates monitored by the Energy Research Unit from the World Bank report.
The most dangerous and final scenario remains the “Great Disturbance,” the potential impact of which could be equivalent to the impact of the Arab oil embargo during the October 1973 war between Egypt, Syria, and Israel.
This scenario expects global oil supplies to decline sharply, ranging between 6 million and 8 million barrels per day, which could lead to an increase in oil prices between 56% and 75%, to range between $140 and $157 per barrel.
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