Global Commodity Prices Predicted to Decline Through 2026 Due to Record Oil Surplus

By Nathan Abbington

Cover Image Attribute: Image by Antonio Cansino from Pixabay

According to the World Bank’s latest Commodity Markets Outlook, global commodity prices are projected to fall to a five-year low in 2025 due to a significant oil surplus, which is expected to mitigate the price impacts of any escalating conflict in the Middle East. Despite this decline, commodity prices are still anticipated to be 30% higher than their levels in the five years preceding the COVID-19 pandemic.
In 2024, global oil supply is anticipated to outpace demand by an average of 1.2 million barrels per day, marking a significant oversupply that has only been seen twice before: during the pandemic shutdowns in 2020 and the oil-price collapse of 1998. This new surplus is largely attributed to a shift in China, where oil demand has plateaued since 2023 due to a slowdown in industrial activity and a rise in sales of electric vehicles and liquefied natural gas (LNG) trucks. Additionally, several non-OPEC+ countries are expected to increase their oil production, while OPEC+ itself holds a considerable spare capacity of 7 million barrels per day, nearly double that of 2019, prior to the pandemic.
Between 2024 and 2026, global commodity prices are projected to decrease by almost 10%. Food prices are forecasted to drop by 9% this year, followed by an additional 4% reduction in 2025, although they will still remain approximately 25% higher than the average from 2015 to 2019. In the energy sector, prices are expected to decline by 6% in 2025 and by another 2% in 2026. The anticipated decreases in food and energy prices may assist central banks in their efforts to manage inflation.
However, the situation remains delicate, as escalating armed conflicts could disrupt energy supplies and lead to increased prices for both food and energy. Such disruptions would complicate the central banks' ability to control inflation, potentially undermining the expected price reductions and creating further economic challenges.

“Falling commodity prices and better supply conditions can provide a buffer against geopolitical shocks,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President. “But they will do little to alleviate the pain of high food prices in developing countries where food-price inflation is double the norm in advanced economies. High prices, conflict, extreme weather, and other shocks have made more than 725 million people food insecure in 2024.” 

Over the past year, oil prices have seen considerable volatility due to the Middle East conflict, as fears persist that crucial oil and gas infrastructure in major producing countries could be impacted if hostilities worsen. Assuming the situation remains stable, the price of Brent crude is expected to average $73 per barrel in 2025, a four-year low and a decrease from the current $80 per barrel.
The report also examines a potential escalation scenario, considering a 2% reduction in the global oil supply—around 2 million barrels daily—similar to disruptions during the Libyan civil war in 2011 and the Iraq war in 2003. In this case, Brent crude prices could initially surge to $92 per barrel. Nevertheless, unaffected oil producers would likely respond to the price increase by raising their output, which would moderate the price spike.
If this temporary supply shock occurs, the resulting price surge could subside, with oil prices settling to an average of $84 per barrel in 2025. Although this would be 15% higher than the baseline forecast for that year, it would only be a slight 5% increase over the average price in 2024, reflecting a market able to adapt relatively quickly to disruptions.
“The good news is that the global economy appears to be in much better shape than before to cope with a significant oil shock,” said Ayhan Kose, the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group. “That opens up some rare opportunities for policymakers in developing economies: first, declining commodity prices can provide a helpful complement to monetary policy to bring inflation back to targets; second, policymakers have a window to wind back costly fossil-fuel subsidies.” 

Gold, a favored "safe haven" asset, is expected to reach record highs this year, with prices increasing by 21% over the 2023 average. Known for its stability during geopolitical or policy uncertainties, gold prices are predicted to remain significantly elevated—around 80% higher than the average pre-pandemic levels—over the next two years, with only a slight decline anticipated. Meanwhile, prices for industrial metals are projected to stay steady through 2025-26, as the effects of China’s weakening property market are balanced by tight supply and rising demand from the global energy transition. However, unexpected economic shifts in China could still cause price volatility in metal markets.

The report’s special focus section explores why global commodity prices were so synchronized during and after the pandemic. It concludes that price movements from 2020 to 2023 were driven by the pandemic’s global economic impact and commodity-specific shocks like Russia's invasion of Ukraine. Such synchronized price increases tend to fuel global inflation while dampening economic growth.

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