Commodity prices are projected to experience a slight downturn in 2024 and 2025 but are expected to remain above pre-pandemic levels, according to the World Bank.
Energy prices are expected to decline by 3% in 2024, as notably lower prices of natural gas and coal offset higher oil prices, followed by a further decline of 4% in 2025, wrote John Baffes, a senior agriculture economist of the Development Economics Prospects Group of the World Bank, and Kaltrina Temaj, a research analyst, in a blog on the website of the global lender.
Agricultural prices are expected to ease as well in this year and next amid improved supply conditions. Metal prices are set to remain steady in 2024, before rising slightly in 2025.
“Although the price forecasts assume no further conflict escalation, risks remain tilted to the upside, stemming from the possibility of conflict in the Middle East and its consequent impact on energy supplies,” said the post.
Commodity prices fell 3% in the first quarter of 2024, driven by lower energy prices alongside relatively stable agriculture and metals prices. Energy prices declined 3% in 2024’Q1, mostly in response to lower natural gas and coal prices.
However, oil prices exhibited significant volatility, responding to escalating tensions in the Middle East and a supply outlook that was tighter than anticipated.
Agriculture prices saw minimal change, with decreases in food and fertilizer prices balanced by a surge in beverage prices, attributed to supply shortages induced by adverse weather conditions. Meanwhile, metal prices remained generally unchanged during the quarter, with a decline in iron ore prices offsetting increases in other metal prices.
Brent crude oil prices surpassed $91 per barrel in early April, driven by escalating geopolitical tensions and further production cuts by OPEC-plus. Oil prices have experienced considerable volatility amid intensifying concerns about the conflict in the Middle East, tight supply conditions in response to OPEC-plus production cuts, and a strengthening of global industrial activity.
Recent reductions in US inventories, coupled with revised projections from the International Energy Agency shifting from a predicted surplus to a modest deficit, have further bolstered market confidence.
Geopolitical developments in the Middle East and disruptions in Russia’s refinery sector since mid-March have heightened concerns about broadening instability in oil supplies. Oil prices are anticipated to average $84/bbl in 2024 (up from $83/bbl in 2023), before tapering to $79/bbl in 2025.
Natural gas prices plummeted in 2024’Q1, reaching levels almost 40% lower than a year earlier. The European benchmark fell by 35% in the first quarter of 2024, driven by high inventories, reversing gains seen in the previous quarter.
