Global commodity prices are set to tumble to a five-year low in 2025 amid an oil glut that is so large it is likely to limit the price effects even of a wider conflict in the Middle East.
The prediction comes from the World Bank’s latest Commodity Markets Outlook, which says despite the oversupply, overall commodity prices will remain 30% higher than they were in the five years before Covid.
Next year, the global oil supply is expected to exceed demand by an average of 1.2 million barrels per day, a glut that has been exceeded only twice before – during the pandemic-related shutdowns in 2020 and the 1998 oil-price collapse. The new oversupply partly reflects a major shift in China, where oil demand has essentially flatlined since 2023 amid a slowdown in industrial production and an increase in sales of EVs and trucks powered by liquefied natural gas (LNG). In addition, several countries that are not part of the Organization of Petroleum Exporting Countries or its allies (OPEC+) are expected to ramp up oil production. OPEC+ itself maintains significant spare capacity, amounting to seven million barrels per day, almost double the amount on the eve of the pandemic in 2019.
From 2024 through to 2026, global commodity prices are projected to plummet by nearly 10%. Global food prices are set to fall 9% this year and an additional 4% in 2025 before levelling off. That would still leave food prices nearly 25% above the average level from 2015 to 2019.
Energy prices are expected to drop by 6% in 2025 and an additional 2% in 2026. Falling food and energy prices should make it easier for central banks to control inflation, says the World Bank. However, an escalation in armed conflicts could complicate that effort by disrupting energy supply and driving up food and energy prices.
Over the past year, conflict in the Middle East has brought significant volatility to oil prices – particularly because of concerns that the oil and gas infrastructure of major commodity producers could be damaged if the conflict were to intensify. Assuming the conflict does not intensify, the annual average price of Brent crude is expected to fall to a four-year low of $73 a barrel in 2025, down from $80 a barrel this year.
The report also assesses what might happen if the conflict were to escalate, specifically if it resulted in reducing the global oil supply by 2%, or two million barrels per day, by the end of this year – a scale of disruption that occurred with the Libyan civil war in 2011 and the Iraq war in 2003. If a similar disruption were to recur, Brent prices would initially rise sharply to a peak of $92 a 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% above the baseline forecast for 2025 but only 5% above the 2024 average.
