The World Bank has projected a significant decline in global commodity prices, expecting them to reach a five-year low in 2025, driven largely by a substantial oil glut. This surplus is anticipated to mitigate the price impacts that might arise from escalating conflicts in the Middle East.
These insights are detailed in the World Bank Group’s report titled “World Bank 2024 Commodity Markets Outlook October 2024,”released last weekend.
The report indicates a forecasted drop of 5 per cent in commodity prices for 2025, followed by a further decline of 2 per cent in 2026.
The report stated “Brent oil price is projected to average $80/b in 2024, about $3/b lower than last year, with prices expected to hover around $75 for the rest of the year before drifting lower to $73/b in 2025 and $72/b in 2026.
“This projection is predicated on no prolonged escalation in ongoing armed conflicts, a slowdown in oil demand growth, and a well-supplied oil market.
“Indeed, under these baseline assumptions, global oil supply next year is expected to exceed demand by an average of 1.2 million bpd—a degree of oversupply only surpassed during COVID-19-related shutdowns in 2020 and the 1998 oil price collapse.”
The projected oil glut is attributed to significant changes in China, where oil demand has stagnated since 2023.
This shift is linked to a slowdown in industrial production and a rise in the adoption of electric vehicles and trucks powered by Liquefied Natural Gas.
The report also noted that several countries outside of the Organisation of Petroleum Exporting Countries (OPEC) and its allies (OPEC+) are expected to increase their oil production.
However, it cautioned that if the ongoing conflict in the Middle East escalates and leads to a reduction in global oil supply by 2 per cent, or approximately 2 million barrels per day, Brent crude prices could initially surge to a peak of $92 per barrel.
“However, oil producers unaffected by the conflict could quickly respond to higher prices by boosting oil production.
“As a result, the price spike could be relatively short-lived, with the oil price averaging $84 a barrel in 2025. That would still be 15 per cent above the baseline forecast for 2025 but only 5 per cent above the 2024 average,” the report stated.
The report further projected that global oil supply will increase to approximately 103 million barrels per day (mb/d) in 2024, up from 102.3 mb/d in 2023, and is expected to rise to about 105 mb/d in 2025.
Most of this production growth is anticipated to come from the United States, which is projected to see increases of around 0.6 mb/d in both 2024 and 2025.
The report said, “Supply is projected to continue increasing up to 0.5 mb/d a year in Brazil, Canada, and Guyana combined. In 2025, production is also predicted to increase in several small producers, such as Kazakhstan, Norway, and several African countries.
“Supply from OPEC+ members is assumed to increase only slightly in 2025, based on the assumption that the great majority of the 2.2 mb/d voluntary cuts will be extended further.”
