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World Bank raises oil forecast—but don’t get too hopeful

The World Bank has upped its oil price forecast for 2015, but the marginal rebound in the price of Brent crude at the start of the year won't pull energy prices up to anywhere near 2014 levels, the international body said on Wednesday.

Crude oil is now expected to average $57 per barrel for the year—up from the World's Bank's estimate of $53 per barrel back in April. Geopolitical tensions and more closures of high-cost oils rigs could push the forecast even higher, the bank added in its "Commodity Markets Outlook" report.

This follows a greater-than-expected 17 percent rise in crude prices in the second quarter, even as prices for other energy commodities, such as natural gas and coal, declined, the World Bank said. In general, commodities, including metals and agricultural products declined between April and June.


Worker in Permian Basin oil field
Getty Images

Natural gas fell 13 percent during the time period, while coal saw a 4 percent decline, both on the back of weak demand and excessive supply.

Though the increase in oil prices more than offset the natural gas and coal stumble, combined energy prices are still projected to average 39 percent below 2014 levels.

Despite a slightly recovery earlier this year, Brent crude prices have fallen almost 50 percent over the past 12 months, with oil trading around $57 per barrel on Wednesday.

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The World Bank forecast flat oil prices for the rest of the year, "even as the large supply surplus begins to contract."

It added that rising output from the Organization of Petroleum Exporting Countries (OPEC) would continue to pressure prices. The oil cartel has refused to cut production in the hopes of squeezing non-members like the U.S. and Russia out of the market.

"Despite the marginal increase in the price forecast for 2015, large inventories and rising output from OPEC members suggest prices will likely remain weak in the medium-term," said John Baffes, senior economist and lead author of the "Commodity Markets Outlook", said in an accompanying press release.

However, Neil Atkinson, head of analysis at Lloyd's List Intelligence told CNBC: "That's a tired old record, blaming OPEC."

He said that collectively, oil producers across the world were making more than demand could meet.

Still, Atkinson said the minor bump in the World Bank's forecast made "reasonable sense," given the firmer trend in oil prices since mid-April. He said that his own forecast for prices also fell between $55 to $65 per barrel.

Sanford C. Bernstein has taken a relatively bullish view, forecasting a $65 per barrel average for the year. Its outlook for 2016 Brent crude prices is even higher, at $86 per barrel.

"We firmly believe that we'll see a structural reduction in supply growth," Nicholas Green, a senior research analyst at the asset management firm, told CNBC, adding that the reduction would most likely need to come from North America.