World Bank predicts global commodity prices will fall to 5-year low in 2025

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Lerato Khumalo

The Bank published the October 2024 issue of the Commodity Markets Outlook Report. The report stated that global commodity prices are expected to decrease by 2026.

The report stated that global commodity prices will fall to the lowest level in the last five years in 2025 due to an oil abundance that is large enough to limit the price effects of even a wider conflict in the Middle East, although general commodity prices will increase by 30 percent compared to the five years before the Covid-19 outbreak. It was noted that it will continue to remain high.

OIL LEADS THE DECLINE IN COMMODITY PRICES

The report stated that after commodity prices decreased by 3.4 percent this year, they are expected to decrease by 5.1 percent in 2025 and 1.7 percent in 2026, which will cause prices to fall to their lowest levels since 2020.

In the bank’s report, it was stated that global commodity prices are estimated to decrease by approximately 10 percent from 2024 to 2026.

The report emphasized that the predicted decreases were led by oil prices, and it was stated that the increases in natural gas prices and the stable outlook in metals and agricultural raw materials limited these decreases.

The report stated that next year global oil supply is expected to exceed demand by an average of 1.2 million barrels per day, and reminded that this was an abundance that was experienced only twice before, during the epidemic period in 2020 and during the collapse in oil prices in 1998.

In the World Bank report, it was noted that the price of Brent type crude oil is predicted to be 80 dollars per barrel on average in 2024, and will decrease to 73 dollars in 2025 and 72 dollars in 2026.

EXPECTATION TO DECLINE IN FOOD AND ENERGY PRICES

The report stated that global food prices are expected to stabilize after falling 8.5 percent this year and 4 percent in 2025, and that food prices will remain approximately 25 percent above the average level between 2015 and 2019.

The report pointed out that energy prices are expected to decrease by 5.8 percent this year, 6.2 percent next year and 2.1 percent in 2026, and stated that the decrease in food and energy prices will make it easier for central banks to control inflation.

The bank’s report emphasized that the escalation of armed conflicts could complicate this effort by disrupting energy supplies and increasing food and energy prices.

The report noted that the possibility of escalation of conflicts in the Middle East poses a significant upside risk for energy prices in the near term, and stated that this could have potential knock-on consequences for other commodities.

AVERAGE GOLD PRICE IS EXPECTED TO BREAK A RECORD THIS YEAR

The report stated that the average price of gold, which is a popular choice for investors looking for a “safe haven”, is expected to break a record this year and rise 21 percent above its average in 2023.

The report stated that the price of gold, which has a special position among assets, frequently rises during periods of geopolitical and political uncertainty, including conflicts, and that gold prices are expected to remain 80 percent higher than the average of the five years before the Covid-19 outbreak in the next two years and show only a slight decrease. .

The report noted that industrial metal prices are expected to follow a stable course in 2025-2026, as the weakness in China’s real estate sector is balanced by tight supply conditions and increasing demand for some metals resulting from the energy transition, but unexpected growth results in China may lead to fluctuations in metal markets.