World Bank predicts rise in oil production, reductions in crude price

WASHINGTON, D.C. (Feb. 4, 2000) — The World Bank expects soaring oil prices to settle at less than $20 US a barrel by the end of this year, provided that oil producing nations agree to raise output when they meet next month.

Oil prices have gone as high as just shy of $30 a barrel, after members of the Organization of the Petroleum Exporting Countries and some nonmembers cut supplies in response to a glut in 1998 that caused prices to dip to $10.80 per barrel, a 12-year low.

OPEC has hinted the cuts might be extended when the group meets on March 27, but the World Bank is predicting otherwise.

The World Bank’s forecast on oil prices was contained in the latest issue of Global Commodity Markets, which is published four times a year.

The report said stocks would continue to decline throughout the winter, but that OPEC would likely raise production, causing the price of crude to fall.

Continued high prices “would dampen demand and stimulate development of competing supplies, making it more difficult for OPEC to raise production in the future,” the report said.

The report said oil demand is likely to pick up starting in April, and the combination of high prices, low stocks, and strong demand would mandate higher OPEC production. The key for OPEC, the report continued, “is to raise production in a coordinated manner” so that prices stay just above the $20 a barrel level its members say they want to maintain.