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The World Bank was right about oil prices...

RP 04

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Article from -06

Oil price to fall to below $53 by 2008: World Bank

Wed Dec 13 2006, 1:35 AM ET


WASHINGTON (Reuters) - High global oil prices are likely fall to just below $53 in 2008 as supplies increase and demand growth eases, the World Bank said on Wednesday.

The World Bank's annual Global Economic Prospects report said a record U.S. oil price of $78.40 in July weakened demand growth despite accelerated world economic activity.

"Over the medium term, limited spare capacity and strong global (economic) growth suggest that oil prices will remain volatile," the World Bank said.

"The basic assumption is that because of the (economic) adjustments we are observing now, there is a tendency for oil prices to move in the long run to around $40 a barrel," World Bank economist Hans Timmer told reporters.

The development lender said investments to expand production already in the works were likely to increase world output capacity by about 15 million barrels a day (mbpd) by 2010, implying a 3 mbpd annual increase, well above expected increases in demand of between 1.2 and 2 mbpd annually.
Energy experts see more oil production coming on-stream in the next few years from Africa, Saudi Arabia and the Caspian Sea.

OPEC pumped 28.97 million barrels of oil per day in November, down 495,000 bpd from October.

The Organization of the Petroleum Exporting Countries in October agreed a 1.2 million bpd cut from November 1 -- its first decline in two years -- in response to a 25 percent price plunge from the record in July.

The World Bank warned that with spare production capacity at only 3 mbpd, global oil markets remain vulnerable to supply shocks.

"Because no country can easily ramp up production, if output in a producing country were to fall significantly, world supply would fall, provoking a decline in economic activity," the World Bank said.
 
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