The World Bank forecasts that global commodity prices will drop to their lowest levels in five years by 2025, with a continued decline expected in 2026, primarily due to an oil surplus. This outlook comes from the Commodity Markets Outlook report released in October 2024.
The report indicates that the oil surplus will be significant enough to mitigate the price impacts of potential wider conflicts in the Middle East. However, overall commodity prices are still projected to remain 30% above the levels recorded during the COVID-19 pandemic.
Oil prices are expected to decrease by 5.1% in 2025, followed by a 1.7% drop in 2026, after experiencing a 3.4% decline in 2024. Despite these decreases, rising natural gas prices and a stable outlook for metals and agricultural raw materials will help to cushion the overall decline.
Next year, the global oil supply is predicted to outstrip demand by an average of 1.2 million barrels per day, reminiscent of the oil abundance seen during the pandemic in 2020 and the price crash in 1998. Brent crude oil is projected to average $80 per barrel in 2024, dropping to $73 in 2025 and further to $72 in 2026.
Global food prices are anticipated to stabilize after an 8.5% decrease this year and a further 4% drop next year, remaining approximately 25% above the average levels recorded between 2015 and 2019.
The report estimates energy prices will fall by 5.8% in 2024 and 6.2% in 2025, with a 2.1% decline expected in 2026. These reductions in food and energy prices are likely to assist central banks in their efforts to manage inflation.
However, the risk of escalating conflicts in the Middle East poses a significant upside risk to energy prices in the near term, which could disrupt energy supplies and affect other commodity prices.
Meanwhile, the average price of gold, often seen as a safe haven for investors, is expected to reach a record high in 2024, increasing by 21% from the previous year’s average due to geopolitical tensions and political uncertainties. Gold prices are projected to remain 80% above the five-year average seen before the pandemic over the next two years.
For industrial metals, a stable price trajectory is anticipated over the next two years, as challenges in China’s real estate sector are balanced by tight supply conditions and rising demand for certain metals linked to energy transformation. However, unexpected growth in China could introduce volatility in the metal markets.
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