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
