Tanzania Investment and Consultant Group Ltd

| Economic Research Centre

A comprehensive analysis of commodity prices, focusing on energy, metals, and agricultural products In '24
October 17, 2024  
Commodity prices are projected to stabilize after the volatility caused by the COVID-19 pandemic and the war in Ukraine, though they will remain at historically high levels. In 2024, oil prices are forecast to rise to $84 per barrel, up from $82.6 in 2023, but will gradually decline to $78.1 per barrel by 2026. Non-energy […]

Commodity prices are projected to stabilize after the volatility caused by the COVID-19 pandemic and the war in Ukraine, though they will remain at historically high levels. In 2024, oil prices are forecast to rise to $84 per barrel, up from $82.6 in 2023, but will gradually decline to $78.1 per barrel by 2026. Non-energy commodities, including metals and agricultural products, are expected to see modest declines, with the non-energy index slightly decreasing to 110.1 in 2024. However, risks such as geopolitical tensions, climate change, and trade disruptions could still affect price trends globally.

1. Overview of Commodity Prices

  • Commodity prices have stabilized after the sharp fluctuations seen during the COVID-19 pandemic and the war in Ukraine. Prices for both energy and non-energy commodities are expected to remain at historically high levels but will show modest declines over the forecast horizon.
  • Aggregate commodity prices are expected to decline in 2024, though fluctuations in specific sectors (like energy and food) will continue to drive inflation and impact global trade​.

2. Energy Prices

  • Oil prices are expected to remain elevated due to tight supply-demand balances, geopolitical tensions, and production cuts by major oil-producing countries.
    • In 2024, oil prices (Brent crude) are forecast to average $84 per barrel, slightly higher than the $82.6 per barrel in 2023​.
    • Prices are projected to ease to $79 per barrel by 2025 and $78.1 per barrel in 2026​.
    • Natural gas prices and coal prices are expected to remain lower in 2024 compared to the peaks seen during the energy crises of 2022-2023​.
  • Energy index: The index, which tracks overall energy prices, is expected to decline modestly in 2024 by 0.6%, reflecting decreases in coal and natural gas prices​.
    • Energy index: In 2024, the World Bank's energy index is projected to drop to 104.0, down from 106.9 in 2023​.

3. Non-Energy Commodities

  • Metals prices are expected to remain stable, with demand pressures balancing out due to increased investment in green technologies (e.g., electric vehicles and renewable energy infrastructure).
    • Prices for metals are forecast to stabilize, driven by the demand for metals-intensive green energy projects, offsetting reduced demand from China’s real estate sector​.
  • Agricultural prices are expected to decline modestly due to well-supplied global markets, particularly for food crops like grains and edible oils.
    • Grain prices are projected to decline slightly, supported by improved harvests and less volatile global supply chains​.

4. Food and Agricultural Commodities

  • Food prices: Although still elevated, global food prices are expected to stabilize and decline slightly over the forecast horizon. The non-energy commodity index is expected to see a modest decrease of 0.2% in 2024​.
    • Food prices: High food prices driven by supply disruptions in previous years are expected to stabilize in 2024, reflecting better weather conditions and fewer disruptions in global supply chains​.
  • Non-energy index: This index, which includes agricultural and metals prices, is projected to decline slightly in 2024 to 110.1, down from 110.2 in 2023, showing little movement overall​.

5. Risks to Commodity Prices

  • Geopolitical tensions: Continued geopolitical tensions, particularly in regions rich in energy resources like the Middle East, could drive up oil prices unexpectedly, leading to higher inflation globally.
  • Climate-related disruptions: Extreme weather events could impact food production, leading to sudden price spikes for agricultural commodities, especially food crops​.
  • Trade fragmentation: Growing protectionism and trade barriers could lead to supply chain disruptions, particularly in energy and agricultural markets, pushing prices higher​.

6. Long-Term Projections

  • While oil prices are expected to decline gradually to $78.1 per barrel by 2026, non-energy commodities (particularly metals) will maintain stable demand driven by the ongoing energy transition.
  • Agricultural prices will continue to be influenced by climate risks and global demand but are expected to trend downward as global supply stabilizes​.

Key Figures:

  • Oil prices:
    • $84 per barrel in 2024, slightly up from $82.6 per barrel in 2023.
    • Gradual decline to $79 per barrel in 2025 and $78.1 per barrel in 2026​(GEP-June-2024).
  • Non-energy index:
    • Expected to decrease slightly to 110.1 in 2024 from 110.2 in 2023​(GEP-June-2024).
  • Energy index:
    • Forecast to decrease slightly from 106.9 in 2023 to 104.0 in 2024​(GEP-June-2024).

Summary of Commodity Price Outlook:

  • Oil prices will remain elevated but are expected to gradually decline after 2024.
  • Non-energy commodities like metals and agricultural products are projected to remain relatively stable, with some modest declines due to improved global supply and the energy transition.
  • Risks from geopolitical events, climate change, and trade barriers could still cause volatility in key commodity markets.

Source: Global Economic Prospects June 2024 report

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