The latest report on the state of commodity markets from the World Bank anticipates a significant decline in prices for these products by 2025, with a particular focus on the energy and food sectors.
Although this decrease is expected, prices will still be considerably higher than pre-pandemic levels. Additionally, instability in commodity markets is likely to persist, heavily influenced by geopolitical tensions in the Middle East and a slowdown in demand from China.
Below are the projections for the following sectors:
Oil
The oil market is expected to face an imbalance in 2025, with a projected supply of 1.2 million barrels per day exceeding demand.
This is attributed to a decrease in oil demand in China, where industrial growth has slowed and sales of electric vehicles and trucks using liquefied natural gas have increased.
Furthermore, several countries outside of OPEC+ will ramp up production, while OPEC+ will have considerable idle production capacity (around 7 million barrels per day, nearly double that of 2019). Unless significant supply disruptions occur due to conflicts, the average price of Brent crude is expected to decline from $80 per barrel in 2024 to $73 in 2025.
Base Metals
In the short term, industrial metal prices are anticipated to remain relatively stable in 2025 and 2026. However, the supply and demand dynamics for these metals are influenced by multiple factors, including the weakness of the real estate market in China, which restricts demand, and the transition to clean energy, increasing the need for specific metals such as copper and lithium.
Supply may be constrained by limitations in the extraction and production of these metals, and any unexpected fluctuations in the Chinese economy could cause instability in these markets.
Food
Food prices fell by 9% in 2024, with an additional decline of 4% expected in 2025.
Despite these reductions, food prices will remain 25% higher than the average between 2015 and 2019. The stabilization of these prices after 2025 will help alleviate inflationary pressures, although in developing countries, food prices continue to generate high inflation, particularly affecting the most vulnerable populations.
The decrease in food prices is also due to a gradual recovery in supply following the effects of the pandemic and geopolitical conflicts.
Agricultural Commodities
The drop in agricultural product prices includes both food and agricultural inputs such as fertilizers, whose decline has partially alleviated production cost pressures.
Despite the decrease in prices, they remain elevated compared to pre-pandemic levels. Extreme weather events and supply chain disruptions caused by geopolitical tensions continue to pose risks for this sector.
Overall, the report highlights that price fluctuations have shown less synchronization in recent months, contrasting with the pandemic period and the crisis in Ukraine, where prices of various commodities rose simultaneously due to global disruptions.
The decline in the prices of these commodities could help ease inflationary pressures and facilitate central banks’ efforts to contain inflation, especially in developing nations.
However, the World Bank warns that the positive effect of reduced prices could be limited if geopolitical conflicts intensify, particularly those affecting energy supply. This could also open up opportunities to reduce fossil fuel subsidies and focus efforts on energy transition policies.