World Bank Expects Decline in Commodity Prices and Oil

World Bank October Report: Decline in Commodity Prices Expected

The World Bank has released its Commodity Markets Outlook Report for October. The report emphasizes that commodity prices are expected to decline to their lowest level in the last six years by 2026, which means that prices will fall for the fourth consecutive year.

The report states that a 7% decline in commodity prices is expected this year and next year. It notes that weak global economic growth, increasing oil surplus, and political uncertainties are influencing this decline.

It was noted that falling energy prices are alleviating global inflation and the decrease in rice and wheat prices is making food more accessible in some developing countries.

Expected Decline in Oil Prices

According to the report, the global oil surplus has significantly increased this year and is expected to exceed 65% of the highest level seen in 2020 next year. With the rising demand for electric and hybrid vehicles, the price of Brent crude oil which averaged $68 in 2023, is expected to decrease to $60 by 2026. This would be the lowest price in the last five years.

Additionally, general energy prices are forecasted to decline by 12% in 2025 and by 10% in 2026.

Decline in Food and Other Commodity Prices

Food prices are also expected to decrease. A 6.1% drop is forecasted for 2025, and a 0.3% drop for 2026. Soybean prices fell to record levels this year, and they are expected to stabilize over the next two years. Moreover, prices for coffee and cocoa are anticipated to decline until 2026 due to improved supply.

Fertilizer prices are expected to increase by 21% in 2025, followed by a 5% decline in 2026. This situation may raise concerns about future crop yields by narrowing farmers' profit margins.

High Increase Expected in Gold Prices

The report highlights that precious metals have reached record levels this year. Demand for safe-haven assets and purchases by central banks are driving up the price of gold. Gold prices are expected to rise by 42% in 2025 and increase by 5% in 2024, nearly doubling the average from 2015-2019. Moreover, silver prices are anticipated to rise by 34% and by 8% in 2026.

The World Bank report stated that if global growth remains weak, commodity prices could fall more than expected.