World Bank on Tuesday raised its forecast for crude oil prices in 2016 to 41 US dollars per barrel, saying that the oversupply in markets is expected to recede.

In its latest Commodity Markets Outlook report, the Washington-based global lender raised its forecast for crude oil prices this year to 41 dollars per barrel from its January's forecast of 37 dollars per barrel. The upgrade reflected the improving market sentiment and a weakening dollar, and the World Bank also expected the oversupply will become eased.

"We expect slightly higher prices for energy commodities over the course of the year as markets rebalance after a period of oversupply," said John Baffes, lead author of the report. "Still, energy prices could fall further if OPEC (the Organization of the Petroleum Exporting Countries) increases production significantly and non-OPEC production does not fall as fast as expected."

Oil prices recovered from a low of 25 dollars per barrel in mid-January to 40 dollars per barrel in April following production disruptions in Iraq and Nigeria and a decline in non-OPEC production, especially the shale oil production in the U.S.

Despite the prices upgrade, the World Bank expected the oil prices will remain lower than last year's. Energy prices, including oil, natural gas and coal, are expected to fall 19.3 percent this year from the previous year, said the World Bank. The forecasted decline was much smaller than its January's forecast of a 24.7-percent fall.

Persistently elevated supplies and weak growth prospects in emerging market and developing economies are the major reasons that keep the energy prices lower than last year's, said the World Bank.

The World Bank revised down its forecast for agriculture prices, as it expects 2016 will be another favorable harvest year for most grain and oilseed commodities. It expected agriculture prices to fall 4 percent this year.

Metal prices are projected to decline 8.2 percent this year, less than its January's forecast of 10.2 percent decline. The upgrade reflected the expectations of stronger demand growth from China, said the World Bank.