The World Bank predicts a significant drop in commodity prices in 2025

According to the World Bank forecast, global commodity prices may fall to a 5-year low in 2025 due to an oil glut, but will remain 30% higher than they were 5 years before the covid pandemic.

 

Oil supply in 2025 will exceed demand by an average of 1.2 million barrels/day, which will limit price growth even in the event of a large-scale conflict in the Middle East. A larger surplus was previously recorded only twice - in 2020 against the background of the pandemic and in 1998 after the collapse of oil prices. The surplus is due, in particular, to the maintenance of oil demand in China at the level of 2023 due to a slowdown in industrial development and an increase in sales of electric cars and trucks running on natural gas.

 

In addition, several non-OPEC+ countries will increase oil production, and the alliance itself will maintain reserve capacity at the level of 7 million barrels per day, which is twice the figure of pre-pandemic 2019.

 

According to the forecast, global commodity prices will decrease by 10% from 2024 to 2026, and food prices will decrease by 9% in 2024 and 4% in 2025, but will be 25% higher than the 2015-2019 average. The cost of energy carriers will fall by 6% in 2025 and by another 2% in 2026.

 

Falling energy and food prices will make it easier to control inflation, but the escalation of military conflicts may hinder this. In recent months, the situation in the Middle East has led to strong volatility in oil prices.

 

If the conflict does not intensify, the average annual price of Brent oil will fall from $80/barrel in 2024 to $73/barrel in 2025. But in the event of an escalation, world oil supplies may decrease by 2% or 2 million barrels/day, as happened in 2003 during the war in Iraq and in 2011 during the war in Libya. Then oil prices will rise to $92/barrel.

 

Such a jump will be short-lived, since countries not involved in the conflict will be able to quickly increase production, so the average oil price in 2025 will reach $84/barrel, which will exceed the forecast by 15% and the average of 2024 by 5%.

 

The average price of gold in 2024 will grow by 21% compared to the previous year, and over the next two years will exceed the average of the five pre-pandemic years by 80%.

 

Industrial metals prices will remain stable in 2025-2026, as reduced demand from China's real estate sector is offset by growth from the energy transition.

 

Currently, the state of the world economy will allow it to cope with the oil shock much better than before, - experts of the World Bank note.