The World Bank is projecting that global commodity prices will tumble to a five-year low in 2025 because of an oil glut.
According to the Bank's latest commodity markets outlook, the oil glut is so massive that it is likely to temper the price effects of an even wider conflict in the Middle East.
But the World Bank says, despite the expected reduction, commodity prices will remain 30% higher than they were in the five years before the COVID-19 pandemic.
Next year, global oil supply is expected to exceed demand by an average of 1.2 million barrels per day, a glut that has been exceeded only twice before—during the pandemic-related shutdowns in 2020 and the 1998 oil price collapse.
The new oversupply partly reflects a major shift in China, where oil demand has essentially flatlined since 2023 amid a slowdown in industrial production and an increase in sales of electric vehicles and trucks powered by liquefied natural gas.
Additionally, the bank says several countries that are not part of the Organization of Petroleum Exporting Countries or its allies (OPEC+) are expected to increase oil production.
From 2024 through 2026, global commodity prices are projected to plummet by nearly 10 per cent. Global food prices are set to fall nine per cent this year and an additional four per cent in 2025 before leveling off.
Energy prices are expected to drop by six per cent in 2025 and an additional two per cent in 2026.
Falling food and energy prices should make it easier for central banks to control inflation.
But the World Bank cautions that an escalation in armed conflicts could complicate that effort by disrupting energy supply and driving up food and energy prices.
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