Commodity prices are projected to drop steadily through 2026, driven by a stabilizing supply and evolving demand trends. As global economic conditions shift, energy markets, metals, and agricultural sectors all play a role in shaping this forecast. Below, we explore key insights from the World Bank’s October Commodity Market Outlook, examining the factors influencing this downward trend.
Energy Market Trends and Geopolitical Impact
The energy sector has a significant influence on commodity prices, especially in the short term. Oil prices, in particular, have experienced recent volatility due to regional conflicts. While spikes above $90 per barrel occurred in late 2023 and early 2024, these increases were temporary, easing once supply concerns diminished.
Looking ahead, Brent crude oil prices are expected to average $80 per barrel in 2024, then decline to $73 in 2025, and finally settle around $72 in 2026. The projected price drop reflects a combination of factors, including increased supply within OPEC+ and reduced demand from major economies, notably China. However, geopolitical tensions, especially in the Middle East, may still pose short-term risks to energy markets.
Stable Outlook for Metals Despite Transition Challenges
Metals markets appear to have a relatively stable outlook, although some price adjustments are anticipated. The metals price index is expected to soften slightly over the next two years. Base metals like aluminum and copper have shown resilience, largely due to demand from the global energy transition. However, as global industrial growth levels off, these prices may experience gradual declines.
Gold prices, meanwhile, surged throughout 2024 due to geopolitical concerns and increased central bank demand from emerging economies. Yet, as these pressures ease, gold’s upward trend may also stabilize, reflecting the broader balance within metals markets.
Agricultural Commodities and Food Prices
Agricultural commodity prices have shown a more pronounced decline, largely thanks to favorable weather conditions that supported high crop yields in many regions. This trend has improved food affordability in emerging markets, a positive development amid broader global inflation concerns. Barring any major disruptions from climate change, food prices are expected to ease further, providing relief to economies dependent on these imports.
Potential Upside and Downside Risks to Commodity Prices
While the outlook suggests a steady decline, commodity prices face potential risks that could alter this trajectory. Upside risks include the possibility of increased global economic stimulus, particularly from China, which could boost demand. Additionally, extreme weather conditions from climate change could disrupt supply and push prices higher.
On the other hand, a slowdown in global industrial activity would likely reduce demand, stabilizing or further lowering prices. Increased output from non-OPEC producers like the United States and Brazil, along with potential production adjustments from OPEC+, could keep supply ample, reducing upward pressure on commodity prices.
Conclusion: Key Takeaways on Commodity Prices Through 2026
In summary, commodity prices are on a path to reach their lowest levels since 2020, with oil, metals, and agricultural commodities all contributing to this decline. As the global economy stabilizes, factors like energy market dynamics, supply chain resilience, and geopolitical developments will continue to influence price trends. Although there are both risks and opportunities in the forecast, the overall outlook indicates a period of relative stability in commodity prices through 2026.
