The World Bank has reported that global commodity prices are expected to drop to the lowest level in the past five years by 2025, due to an abundance of oil. The Bank published the October 2024 issue of the Commodity Markets Outlook Report. The report indicated that global commodity prices are projected to decline until 2026. It was noted in the report that even a broader conflict in the Middle East would have limited price effects due to a significant oil surplus, causing commodity prices to fall to the lowest level in the past five years in 2025. However, it was also mentioned that overall commodity prices are expected to remain 30% higher than the five years before the Covid-19 pandemic.

DECLINE IN COMMODITY PRICES LED BY OIL
The report stated that after a 3.4% decrease in commodity prices this year, expectations are for a 5.1% decline in 2025 and a 1.7% decrease in 2026, resulting in prices reaching their lowest levels since 2020. The report highlighted that a decrease of approximately 10% in global commodity prices from 2024 to 2026 is anticipated. It emphasized that the decline in prices is led by oil, while increases in natural gas prices and a stable outlook for metals and agricultural raw materials are limiting these declines. The report mentioned that next year, global oil supply is expected to exceed demand by an average of 1.2 million barrels per day, a surplus that has only occurred twice before, during the outbreak in 2020 and the collapse of oil prices in 1998. The report from the World Bank indicated that the price of Brent crude oil is expected to average $80 per barrel in 2024, dropping to $73 in 2025 and $72 in 2026.

EXPECTATIONS OF A DROP IN FOOD AND ENERGY PRICES
The report stated that after an 8.5% decline in global food prices this year and a further 4% decrease in 2025, a stabilization is expected, keeping food prices approximately 25% higher than the average level from 2015 to 2019. It also pointed out that energy prices are anticipated to decrease by 5.8% this year, 6.2% next year, and 2.1% by 2026, and the drop in food and energy prices will make it easier for central banks to control inflation. It was highlighted in the Bank’s report that escalating armed conflicts could disrupt energy supply and increase food and energy prices, making this effort more challenging. The report warned that the escalation possibility of conflicts in the Middle East poses a significant short-term upward risk for energy prices and could have potential chain effects for other commodities as well.

RECORD HIGH AVERAGE GOLD PRICES EXPECTED THIS YEAR
The report mentioned that the average price of gold, a popular choice for investors seeking a “safe haven,” is expected to reach a record high this year and rise above 21% of the average of 2023. It was also noted in the report that the price of gold, which holds a special position among assets and often rises during geopolitical and political uncertainty periods, is anticipated to stay 80% higher than the average of the five years before the Covid-19 pandemic, with only a slight decrease in the next two years. The report outlined that industrial metal prices are expected to follow a stable trend in 2025-2026, balancing the weakness in China’s property sector with some increased demand for certain metals due to tight supply conditions and energy transition, although unexpected growth results in China could lead to fluctuations in metal markets.