The World Bank has issued a warning saying that even a small disruption to crude supplies due to escalating Middle Eastern conflict could remove between 500,000 and 2 million barrels per day, MMbpd from global markets.
The Bank In a report projects that if that happens, prices could rise to between $93 and $102 a barrel, bbl. The outlook could “darken quickly” if the latest conflict widens its scope, with a medium-sized disruption of 3 to 5 MMbpd driving prices as high as $121 a barrel.
The biggest potential disruption foreseen by the bank could remove 6 to 8 MMbpd, comparable in magnitude to the 1973 Arab oil embargo. That worst-case scenario could see prices reach $157 a bbl.
So far, the Israel-Hamas war has had minimal impact on the oil market, which “may reflect the global economy’s improved ability to absorb oil price shocks,” according to the report. The energy crisis of the 1970s led many countries to reinforce their defences against price volatility by reducing their dependence on oil, tapping into expanded energy resources and establishing strategic petroleum reserves, among other measures.
Under the bank’s baseline forecast, oil prices are slated to average $90 a bbl in the current quarter before declining to an average of $81 a bbl next year amid lagging global economic growth.
Overall commodity prices are projected to fall 4.1 per cent next year before stabilising in 2025.
