World Bank sees firm commodity prices, but cautious on Covid

London (Quantum Commodity Intelligence) Commodity prices are expected to remain firm for the balance of 2021 according to the World Bank Wednesday in its semi-annual Commodity Markets Outlook, but noted the outlook is 'heavily dependent' on the success of measures in containing the Covid-19 pandemic.

The report said that energy prices are expected to average more than one-third higher this year compared to 2020, with crude oil averaging $56/b, rising again in 2022.

It says metal prices are expected to climb 30 percent; and agricultural prices are forecast to rise almost 14 percent.

The World Bank noted almost all commodity prices are now above pre-pandemic levels, driven by the upsurge in economic activity, as well as some specific supply factors, particularly for oil, copper, and some food commodities.

"Global growth has been stronger than expected so far and vaccination campaigns are underway, and these trends have buoyed commodity prices. However, the durability of the recovery is highly uncertain," said Ayhan Kose, World Bank Group Acting Vice President for Equitable Growth, Finance & Institutions and Director of the Prospects Group.

Oil demand is expected to firm over 2021 as vaccines are rolled out, especially in advanced economies.

Prices are expected to average $60/b in 2022, but warned if COVID-19 containment falters a further deterioration in demand could put pressure on prices.

Metal prices are expected to give back some of this year's gains as stimulus-driven growth fades in 2022.

A faster-than expected withdrawal of stimulus by some major emerging market economies could pose a downside risk to prices; however, a major infrastructure program in the United States could support prices for metals, including aluminum, copper, and iron ore.

The report also noted that agricultural prices have risen substantially this year, particularly for food commodities, driven by supply shortfalls in South America and strong demand from China.

However, most global food commodity markets remain adequately supplied by historical standards, and prices are expected to stabilize in 2022.