The Commodity Markets Outlook in eight charts

Commodity prices are expected to decline by 5 percent in 2025 and 2 percent in 2026, following a 3 percent decrease this year. As a result, the World Bank’s aggregate commodity price index is projected to reach its lowest level since 2020. The energy price index is projected to drop by 6 percent in 2024, with additional declines of 6 percent in 2025 and 2 percent in 2026. Oil prices primarily drive the projected decrease, although increases in natural gas prices provide some offset. Metal prices are anticipated to edge slightly lower over 2025-26, after rising 6 percent this year, reflecting moderate expected growth of industrial activity in major economies, especially China. Agricultural prices, after a slight increase in 2024, are expected to decline by 4 percent in 2025 due to improved supply conditions.

Commodity prices fell nearly 4 percent in the third quarter of 2024 (q/q), with declines across most categories, except for fertilizer and precious metals. Energy prices dropped by 3.8 percent, led by a nearly 6 percent decrease in oil prices, while coal and natural gas prices saw slight increases. Oil prices remained volatile due to Middle Eastern tensions, ample supplies, and weaker-than-expected demand. Agricultural prices declined over 3 percent, driven by lower prices across food, beverage, and raw material commodities. The fertilizer price index rose nearly 6 percent, primarily due to lower-than-expected nitrogen-based exports. Metal prices experienced a 7 percent decline, reflecting subdued industrial activity in major economies.

Brent crude oil prices averaged $75/bbl during September-October, the lowest since June 2023. However, oil prices have shown heightened volatility due to shifting assessments of geopolitical risks and signs of subdued economic growth in China. According to recent projections from the International Energy Agency, global oil demand is expected to reach approximately 103 million barrels per day (mb/d) in 2024, up from 102.3 mb/d in 2023, and further rise to about 105 mb/d in 2025. With global consumption projected to grow by around 0.9 mb/d in both 2024 and 2025, the oil market is likely to remain in considerable surplus in 2025. Brent prices are expected to average $80/bbl (per barrel) in 2024, down from $83/bbl in 2023, before declining to $73/bbl in 2025 and $72/bbl in 2026. Upside risks to the outlook include lower-than-expected oil production in North America and conflict escalation in the Middle East, while an earlier-than-expected reversal of OPEC+ supply cuts and weaker-than-expected economic growth represent key downside risks.

The World Bank’s natural gas price index increased by 10 percent in 2024Q3 (q/q), with significant divergence across its components. The U.S. benchmark remained stable due to robust domestic production, while liquefied natural gas (LNG) prices rose by 8 percent. In Europe, the benchmark surged by 15 percent in 2024Q3, driven by heightened competition for LNG imports, narrowing the Europe-LNG price gap by 40 percent. Following a decline in 2024, the U.S. natural gas price is projected to rise by 55 percent in 2025, with an additional 9 percent increase expected in 2026, as global LNG demand strengthens. European gas prices are anticipated to increase by 7 percent in 2025, before declining by 9 percent in 2026 amid stagnant demand. The LNG price is expected to closely track the European benchmark due to competition between Asia and Europe for LNG supplies. Upside risks to natural gas prices include conflict-driven production disruptions, reduced availability of Russian production in global markets, and colder-than-average temperatures. A key downside risk is weaker-than-expected global economic growth.

After softening in 2023Q3, agricultural prices edged up in early October, spurred by news of adverse weather conditions in key exporting countries. Food commodity prices declined by 3 percent in 2024Q3 (q/q), leaving them 8 percent below their level from a year ago. Record-high production of maize, rice, soybeans, and wheat in the 2023-24 season, along with favorable crop expectations for the current season, has exerted downward pressure on prices. Following an anticipated 9 percent decline in 2024, food prices are expected to ease by an additional 4 percent in 2025 before stabilizing in 2026. In contrast, beverage prices are projected to average nearly 60 percent higher 2024, before falling 9 percent next year and a further 3 percent in 2026 as coffee and cocoa production recover. Raw material prices, which have been relatively stable during the past few quarters, are expected to edge up in each of the next two years, supported by firm demand.

Despite easing food prices, food insecurity remains a pressing global issue. Since 2017, the prevalence of undernourishment—an essential indicator of global hunger—has been rising, now affecting about 9 percent of the world’s population. The United Nations Food and Agriculture Organization estimates that approximately 735 million people will experience undernourishment by 2025. Factors such as armed conflict, extreme weather events, and economic shocks continue to disrupt local food access in many vulnerable regions. While declining agricultural prices could improve food affordability by reducing food price inflation, recent conflicts in the Middle East may further aggravate food insecurity, particularly in conflict-affected areas.

Metal prices are expected to edge higher in 2024, supported by targeted policy measures. After a 7 percent decline in 2024Q3 amid subdued industrial activity in major economies, prices experienced a brief rally in response to China’s late-September stimulus measures. In the context of tight supply, prices of certain base metals—particularly aluminum and copper—remained sensitive to shifts in the global industrial activity outlook and a sustained demand tailwind from the energy transition. Following a projected 4 percent increase in 2024, base metal prices are anticipated to stabilize in 2025 and decline by 3 percent in 2026 as industrial activity grows at a moderate pace in major economies, including China.

Geopolitical tensions remain a significant upside risk in commodity markets. The possibility of escalating conflicts in the Middle East represents a substantial near-term risk to several commodities. Gold prices—a barometer of safe-haven demand—reached an all-time nominal high in mid-October, fueled by heightened geopolitical tensions, sustained central bank purchases, and a shift toward easing U.S. monetary policy. Downside risks to commodity prices, especially oil (which could impact other commodities), include decelerating global oil demand, particularly from China, increasing diversification of oil production, and ample oil supply capacity held by OPEC+.