The World Bank has said that oil prices will average $44 per barrel in 2021, up from an estimated $41 per barrel in 2020.
The institution also said that demand is expected to rise only slowly as tourism and travel continue to be held back by health concerns and as global economic activity is anticipated to return to pre-pandemic levels only in the year after next.
According to the report, supply restraint is expected to be eased steadily.
Energy prices overall, which also include natural gas and coal, are expected to rebound sizably in 2021, following large declines in 2020, an upward revision from April’s forecast. A resurgence of a second wave of the pandemic that results in more lockdowns and less consumption, and delays in vaccine development and distribution, could lead to lower energy prices than forecast.
It added that while metal and agricultural commodities have recouped their losses from the COVID-19 pandemic and are expected to make modest gains in 2021, energy prices, despite some recovery, are expected to stabilise below pre-pandemic levels next year.
According to the semi-annual commodity market outlook report, oil prices fell dramatically in the early stages of COVID-19 and have only partially regained pre-pandemic price levels, while metal prices declined relatively modestly and have returned to levels that preceded the shock.
Agriculture prices were relatively unaffected by the pandemic, but the number of people at risk of food of the broader effects of the global recession.
Ayhan Kose, World Bank Group Acting Vice President for Equitable Growth, Finance and Institutions and Director for the Prospects Group, said: ”The impact of COVID-19 on commodities has been uneven, and could have lasting effects for energy markets. When declines in commodity prices are short-lived, policy stimulus can buffer their impact. However, when prices remain depressed for an extended period, policy makers need to find solutions so their economies can adjust smoothly to a new normal. Because of COVID-19, the new normal for oil-exporting emerging and developing economies arrived earlier.
“In the post-COVID world, these countries need to be more aggressive in implementing policies to reduce their reliance on oil revenues.”
Metal prices are expected to post modest increases in 2021 after falling in 2020, supported by the ongoing recovery in the global economy and continued stimulus from China. A prolonged period of weak global growth would lead to lower prices than forecast.
Besides, agriculture prices are expected to rise slightly in 2021, following an estimated 3% increase in 2020 following some shortfall in edible oil production.
Concerns about food insecurity remain relevant in several emerging market and developing economies. These concerns are prompted by hits to incomes from the global recession, bottlenecks in food availability at the local level, and border restrictions that have constrained labor supply. Food price inflation has spiked in several countries.
