Commodity prices
Commodity prices

World Bank: Commodity prices will fall in 2016

posted by Simon Guirao
5 February 2016

The prices of 37 out of 46 commodities are expected to drop in 2016, according to analysis by the World Bank.

Leading the way is oil, with the projections for the price of crude lowered from an October forecast of $51 per barrel to $37 in the bank’s latest Commodity Markets Outlook report.

Reasons for the lower estimate include the reintroduction of Iranian exports, the mild winter in the northern hemisphere and more robust US production costs and efficiency gains. Oil prices are expected to continue to decline by a further 27% in 2016, having already fallen 47% in 2015.

The report predicts downward trajectory across all main commodity price indices in 2016, with the caused being attributed to persistently large supplies quenching demand in emerging markets, especially in the cases of industrial commodities.

Non-energy commodities are predicted to fall by 3.7%, and metal prices are expected to drop another 10% on top of a 21% fall in 2015. Agricultural commodities are predicted to be in line for a 1.4% decline.

“Low prices for oil and commodities are likely to be with us for some time,” said John Baffes, senior economist and lead author of the outlook. “While we see some prospect for commodity prices to rise slightly over the next two years, significant downside risks remain.”

Ayhan Kose, director of the World Bank’s Development Prospects Group, added: “Low commodity prices are a double-edged sword, where consumers in importing countries stand to benefit while producers in net exporting countries suffer.

“It takes time for the benefits of lower commodity prices to be transformed into stronger economic growth among importers, but commodity exporters are feeling the pain right away.”

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