World Bank Forecasts Commodity Prices to Plunge to Six-Year Low Amid Global Oil Surplus

The World Bank has projected that global commodity prices will decline sharply in 2025, reaching their lowest levels in six years, driven largely by an oversupply in the oil market and weakening demand across major economies. In its latest Commodity Markets Outlook report, the Bank warned that oil prices could fall below $70 per barrel as global production outpaces consumption, while other commodities such as natural gas, metals, and agricultural products are also expected to face downward pressure.

According to the report, the anticipated oil surplus stems from increased production by key exporters, including the United States, Brazil, and Canada, as well as steady output from OPEC+ members. At the same time, slower economic growth in China, Europe, and several emerging markets has dampened global energy demand, creating a market imbalance that is expected to push prices to multi-year lows.

“Global oil supply is projected to exceed demand by more than one million barrels per day in 2025, leading to a significant drop in prices,” the World Bank stated. It added that the current market dynamics suggest that crude oil prices, which averaged around $82 per barrel in 2024, could fall by as much as 15 percent over the next year if production levels remain high.

The report also highlighted that the downward trend will extend beyond energy commodities. Prices of industrial metals such as copper, aluminium, and iron ore are forecast to decline as construction and manufacturing activities slow in major consuming nations. Similarly, agricultural commodities like wheat, maize, and soybeans are expected to weaken due to favourable harvests and reduced input costs.

World Bank’s Chief Economist for Commodities, John Baffes, explained that while the price drop may ease inflationary pressures for import-dependent countries, it poses serious challenges for resource-dependent economies. “Lower commodity prices can bring relief to consumers but will create fiscal and external pressures for countries that rely heavily on exports of oil, gas, or metals,” Baffes noted.

He emphasised that developing nations, particularly those in Sub-Saharan Africa, Latin America, and the Middle East, could face revenue shortfalls as lower export earnings strain government budgets and foreign reserves. “Policymakers in commodity-exporting countries should prepare for tighter fiscal conditions and consider diversifying their economies to cushion the impact,” he advised.

The World Bank also warned that geopolitical risks, including ongoing conflicts in Eastern Europe and the Middle East, could still trigger short-term price volatility. However, the overall trend points to a global commodities market heading toward stability at lower price levels, following the supply disruptions and price spikes witnessed between 2022 and 2023.

The report further indicated that technological advancements and efficiency gains in energy production have contributed to the sustained oversupply. The increasing adoption of renewable energy sources and electric vehicles has also moderated the long-term demand for fossil fuels, accelerating the shift away from traditional energy commodities.

“In the medium term, structural changes in energy consumption patterns are likely to keep oil and gas prices subdued. Countries must adapt by investing in cleaner energy alternatives and building resilience in non-commodity sectors,” the report stated.

Economists have noted that the World Bank’s projections could have mixed implications for Nigeria and other oil-dependent nations. While lower oil prices may lead to reduced government revenue and foreign exchange inflows, it could also lessen pressure on domestic fuel prices and production costs.

Dr. Ayo Teriba, a financial analyst, said Nigeria must take proactive steps to mitigate the risks associated with falling oil prices. “This projection is a clear warning that reliance on crude oil exports is unsustainable. Nigeria needs to fast-track diversification into manufacturing, agriculture, and services to safeguard economic stability,” he said.

He further explained that although an oil surplus could reduce import costs for refined petroleum and raw materials, it may also undermine the fiscal assumptions underpinning the 2025 budget, which is based on higher oil benchmarks. “If global prices drop significantly, Nigeria could face lower revenue targets and increased borrowing pressures,” he added.

The World Bank’s report noted that commodity-exporting countries should prioritise structural reforms to enhance competitiveness and resilience. It recommended investment in value-added industries, improved logistics infrastructure, and stronger fiscal frameworks to manage cyclical downturns in global markets.

Despite the bearish outlook, the Bank expressed optimism that global demand could stabilise in the medium term if monetary policies ease in advanced economies, supporting investment and trade recovery. However, for now, the forecast points to one of the steepest commodity price declines since 2019, underscoring the fragility of the post-pandemic global recovery.

 

With crude oil prices expected to average below $70 per barrel and other commodities facing similar declines, the coming year may bring both relief and strain — cheaper energy for consumers but tighter fiscal conditions for exporters. The World Bank concluded that the global economy’s ability to adapt to this new commodity landscape will determine how countries navigate the balance between stability, growth, and sustainability in 2025.