Commodity prices are falling across the board as supply exceeds demand, the latest issue of the World Bank's quarterly Commodity Markets Outlook (CMO) has reported.
Most commodity prices fell during the first quarter of 2015, with food down 7.3 per cent, crude oil down 13 per cent and metals down 9 per cent compared to the fourth quarter of 2014. And the CMO said prices were expected to stay weak for the rest of 2015, recovering only slightly in 2016.
"Surplus production and subdued demand due to weak global growth are continuing to depress commodity prices,” said Ayhan Kose, director of the World Bank's development prospects group.
“The slowdown in emerging economies, coupled with a strong US dollar, will likely keep the lid on prices,” he added. Weaker prices will help reduce current account and fiscal deficits in many commodity-importing countries but will harm the economies of commodity-exporting countries.
Crude oil prices fell to an average of $51.6 per barrel in the first quarter of 2015, down from $74.6 per barrel in the previous three months. The World Bank continues to forecast a price of $53 per barrel for 2015 rising to $57 in 2016, though supply could be dramatically increased if a deal over Iran's nuclear programme was reached allowing the country to resume exporting oil.
The CMO described the emergence of shale oil as a possible “game changer” potentially heralding a prolonged period of low oil prices. It ascribed the 9 per cent fall in metal prices to lower demand from China, which accounts for nearly half of global metal consumption.