…Oversupply, reduced demand from China, and stable OPEC+ output contribute to forecasted five-year low in commodity prices.
By Bunmi Yekini
Commodity markets are poised for a significant downturn in 2025, with global prices projected to reach a five-year low as a result of an anticipated oil oversupply and slowing demand, according to the World Bank’s latest Commodity Markets Outlook. While prices are expected to fall, the World Bank cautions that commodity costs will remain roughly 30% above pre-pandemic levels.
Global oil production is forecasted to exceed demand by an average of 1.2 million barrels per day next year, marking a supply surplus larger than any since the COVID-19 pandemic’s peak and the 1998 oil-price collapse. “Falling commodity prices and better supply conditions can provide a buffer against geopolitical shocks,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President. “But they will do little to alleviate the pain of high food prices in developing countries where food-price inflation is double the norm in advanced economies.”
The shift is driven by declining oil demand from China as industrial growth slows and the nation increasingly transitions to electric vehicles and LNG-powered trucks. Alongside this, several non-OPEC+ countries are expected to ramp up production, while OPEC+ itself has retained significant spare capacity, now standing at nearly double 2019 levels.
The report suggests that energy prices will decrease by 6% in 2025 and 2% in 2026, with a cumulative 10% drop expected across all commodity prices by 2026.
On the oil front, the World Bank predicts Brent crude prices to drop to a four-year low of $73 per barrel in 2025, assuming geopolitical tensions do not escalate further. However, the report also considers a scenario where an intensification of conflict could lead to a temporary spike. “The global economy appears to be in much better shape than before to cope with a significant oil shock,” noted Ayhan Kose, the World Bank’s Deputy Chief Economist and Director of the Prospects Group.
Food prices, too, are expected to decrease, although they will remain around 25% higher than their pre-pandemic levels, a dynamic likely to continue to burden developing economies. The report emphasizes that, despite recent declines, volatility remains due to unpredictable events, from weather extremes to regional conflicts that impact global supply chains.
Despite challenges, the World Bank stressed the opportunity for developing economies to capitalize on falling prices by reassessing subsidies and policies. As Kose pointed out, “Declining commodity prices can provide a helpful complement to monetary policy to bring inflation back to targets.”