The World Bank announced on Tuesday that global commodity prices are expected to drop to a five-year low next year, driven by a significant oil surplus and stagnant demand from China.
According to the Bank’s latest report, global oil supply is projected to outpace demand by an average of 1.2 million barrels per day in 2025. This level of oversupply has only occurred twice before, in 1998 and 2020.
The Bank noted that this oil glut is so substantial that it may even dampen price reactions to potential conflicts in the Middle East.
A major factor contributing to this oversupply is a significant change in China, where oil demand has stalled. This is due to the rising popularity of electric vehicles, increased use of liquefied natural gas (LNG) trucks, and a slowdown in industrial production.
Additionally, the World Bank expects non-OPEC+ countries to increase their oil production. This surge will further boost the oversupply and could lead to a nearly 10 percent drop in global commodity prices by the end of 2026.
Despite the anticipated decline, commodity prices are likely to remain about 30 percent higher than they were in the five years prior to the COVID-19 pandemic.
World Bank chief economist Indermit Gill stated that falling commodity prices and improved supply conditions may help cushion the impact of geopolitical tensions. However, he warned that these changes will not significantly ease the burden of high food prices in developing nations, where food-price inflation is currently double that of advanced economies.
The World Bank forecasts that food prices will decrease by nine percent this year and an additional four percent in 2025, but will still be about 25 percent above the levels seen from 2015 to 2019.
Energy prices are also expected to decline, with a projected drop of six percent next year, followed by an additional two percent decrease in 2026.
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