World Bank: Oil prices to fall gradually

SINGAPORE – Oil prices are likely to decline gradually this year and next as record crude prices weaken demand, the World Bank projected Wednesday.

“If you look at the fundamentals, there is scope for lower oil prices,” said Hans Timmer, co-author of the bank’s annual “Global Economic Prospects” report, at its launch in Singapore. “We forecast more or less a sustained, gradual decline.”


The World Bank’s report predicts that a barrel of crude oil will cost $84.10 on average this year and fall by 6.8 percent to $78.40 a barrel in 2009. It estimates that the average price of crude oil last year was $71.20 a barrel.

The forecasts are based an average of three benchmark oil prices: Dubai, Brent and West Texas Intermediate.

“On the demand side, what you are seeing is that the high oil prices start having an impact, in the sense that it slows down demand for oil,” Timmer said. “You see that in high income countries, there’s actually no growth any more in oil demand.”

As demand wanes, OPEC countries have had to reduce their production by a million barrels over the last three quarters to a year to keep prices high, the economist said.

AP