- Global oil prices will average around $90 per barrel in the fourth quarter.
- Oil prices have increased by only 6% since the beginning of the Israel-Hamas war.
- A major disruption could reduce global supply by 6-8 million barrels per day.
The World Bank’s latest report estimates that global oil prices could range from $140 to $157 per barrel in the case of a “major disruption” scenario in the Middle East, similar to the effect of the 1973 Arab oil embargo.
The report said global oil prices will average around $90 per barrel in the fourth quarter of this year and will fall to an average of $81 in 2023 due to slow economic growth, which will reduce oil demand.
However, the report also highlights a significant risk that an escalation of the ongoing conflict in the Middle East could lead to a sharp increase in oil prices.
The report shows that since the beginning of the Israel-Hamas war, oil prices have increased by only 6%, while the prices of agricultural commodities, most metals and other commodities have seen minimal changes.
The report discusses three risk scenarios based on historical conflicts in the region, with varying degrees of disruption. In the event of a “small disruption” equivalent to the reduction in oil production during the 2011 Libyan civil war (about 500,000 to 2 million barrels per day), oil prices could rise to $93 to $102 per barrel. fourth quarter.
A “moderate disruption”, roughly equivalent to the Iraq War in 2003, could reduce global oil supply by 3 million to 5 million barrels per day, resulting in prices between $109 and $121 per barrel. .
The “major disruption” scenario, resembling the effect of the 1973 Arab oil embargo, would reduce global oil supply by 6 million to 8 million barrels per day, causing prices to initially rise to $140 to $157 per barrel, 75 Will increase up to%.
The report also highlights the potential consequences of sustained high oil prices, including higher food prices, particularly in developing countries.
It further said that despite challenges in the country’s real estate sector, China’s oil demand remains surprisingly strong with growth of 12%.
in the first nine months of 2023 compared to the same period in 2022.
The report noted that despite sanctions imposed by Western countries on Russian crude due to the Ukraine conflict, oil production and exports from Russia have remained relatively stable. It notes a shift in Russia’s crude oil exports from Western countries to China, India and Turkey, which has partially offset the decline in Western exports.
The report also discusses the challenges of implementing a price cap on Russian crude, introduced in late 2022. The purpose of this limit is to restrict the use of Western supply services for Russian crude above a certain price, which is violated due to Russia’s trading practices. ,
Finally, the World Bank emphasizes the potential impact of an escalation of the Israel–Hamas conflict on global oil prices and advises policymakers in developing countries to prepare for the possibility of rising inflation.
It also encourages governments to avoid trade restrictions, such as export bans on food and fertilizer, as these can increase price instability and food insecurity.