W/Bank Projects Commodity Prices To Hit 6-year Low As Oil Glut Expands

The World Bank Group has projected global commodity prices to fall to lowest level in six years in 2026, marking the fourth consecutive year of decline.

According to its latest commodity markets outlook, the organisation forecast prices to drop by seven percent  in both 2025 and 2026, driven by weak global economic growth, a growing oil surplus, and persistent policy uncertainty.

Falling energy prices are helping to ease global inflation, while lower rice and wheat prices have helped make food more affordable in some developing countries.

The World Bank said despite the recent declines, commodity prices remain above pre-pandemic levels, with prices in 2025 and 2026 projected to be 23 per cent and 14 per cent higher, respectively, than in 2019.

“Commodity markets are helping to stabilise the global economy,” said World Bank Group’s chief economist and senior vice president for development economics, Indermit Gill. He said the falling energy prices have contributed to the decline in global consumer-price inflation. “But this respite will not last. Governments should use it to get their fiscal house in order, make economies business-ready, and accelerate trade and investment.”

The global oil glut has expanded significantly in 2025 and is expected to rise next year to 65 per cent above the most recent high, in 2020. Oil demand is growing more slowly as demand for electric and hybrid vehicles grows and oil consumption stagnates in China.

Brent crude oil prices are forecast to fall from an average of $68 in 2025 to $60 in 2026—a five-year low. Overall, energy prices are forecast to fall by 12 per cent in 2025 and a further 10 in 2026.

Globally, food prices are also easing, with declines of 6.1 per cent projected in 2025 and 0.3 per cent in 2026. Soybean prices are falling in 2025 because of record production and trade tensions but are expected to stabilise over the next two years. Meanwhile, coffee and cocoa prices are forecast to fall in 2026 as supply conditions improve. However, fertiliser prices are projected to surge 21 per cent in 2025, reflecting higher input costs and trade restrictions, before easing five per cent in 2026. These increases are likely to further erode farmers’ profit margins and raise concerns about future crop yields.

But in Nigeria, the prices of commodities are still on the high side despite a downward trend in official inflation figures.

Precious metals have reached record highs in 2025, fueled by demand for safe-haven assets and continued central bank purchases.

The price of gold—widely viewed as a safe haven during times of economic uncertainty—is expected to increase by 42 per cent in 2025. It is projected to increase by a further per cent next year, leaving gold prices at nearly double their 2015-2019 average. Silver prices are also expected to hit a record annual average in 2025, rising by 34 per cent and further eight per cent in 2026.

The World Bank said commodity prices could fall more than expected during the forecast horizon if global growth remains sluggish amid prolonged trade tensions and policy uncertainty.

Greater-than-expected oil output from OPEC+ could deepen the oil glut and exert additional downward pressure on energy prices. Electric-vehicle sales, which are expected to increase sharply by 2030, could further depress oil demand.

Conversely, geopolitical tensions and conflicts could push oil prices higher and boost demand for safe-haven commodities such as gold and silver. In the case of oil, the market impact of additional sanctions could also lift prices above the baseline forecast.

The bank said extreme weather from a stronger-than-expected La Niña cycle could disrupt agricultural output and increase electricity demand for heating and cooling, adding further pressure to food and energy prices. Meanwhile, the rapid expansion of artificial intelligence (AI) and growing electricity demand to power data centers could raise prices for energy and for base metals like aluminum and copper, which are essential for AI infrastructure.

“Lower oil prices provide a timely opportunity for developing economies to advance fiscal reforms that promote growth and job creation,”said Ayhan Kose, the World Bank’s deputy chief economist and Director of the Prospects Group. “Phasing out costly fuel subsidies can free up resources for infrastructure and human capital—areas that create jobs and strengthen long-term productivity. Such reforms would help shift spending from consumption to investment, rebuilding fiscal space while supporting more durable job creation.”

The report’s special focus section examines the history of international commodity agreements in the context of today’s volatile commodity markets. It finds that while many past efforts—such as inventory controls, production quotas, and trade restrictions—helped stabilize prices for some commodities in the short term, few achieved lasting results.

The World Bank said the most enduring international commodity agreement, the Organisation of the Petroleum Exporting Countries (OPEC), has struggled to sustain market power especially when prices are high—because higher prices tend to draw new competitors into the market.

Instead of using price-control schemes, the report recommends that countries foster more diverse and efficient production, invest in technology and innovation, improve data transparency, and promote market-based pricing to build long-term resilience to price volatility.