Commodity Markets Outlook - April 2024

Overview

• World Bank Group's report on commodity markets.
• Analyzes major commodity groups: energy, agriculture, fertilizers, metals, and precious metals.
• Data cutoff date: April 17, 2024.

State of Commodity Markets

• Geopolitical tensions impacting prices of key commodities, notably oil and gold.
• Brent oil price: $91 per barrel, significantly higher than 2015-19 average.
• Commodity prices expected to decline slightly in 2024 and 2025 but remain above pre-pandemic levels.
• Key risks include conflict escalation in the Middle East and its impact on global inflation.

Energy Markets

Oil

• Recent Developments:
  • Oil prices above $90 per barrel due to geopolitical tensions and supply concerns.
  • U.S. inventories declining; OPEC+ production cuts contribute to tight supply-demand balance.
• Outlook:
  • Brent crude projected to average $84/bbl in 2024.
  • Risks include further conflict escalation and lower U.S. energy production.

Natural Gas

• Recent Developments:
  • U.S. natural gas price fell by 22% in Q1 2024.
  • High European inventories and mild winter reduced demand.
• Outlook:
  • Prices expected to decline in 2024 due to high inventories.
  • Risks: geopolitical issues, delays in U.S. LNG exports, weather events.

Coal

• Recent Developments:
  • Coal prices declined 8% in Q1 2024.
  • Global demand shifted towards Asia.
• Outlook:
  • Prices forecast to fall in 2024 and 2025.
  • Risks: Chinese demand, renewable energy impact.

Agricultural Markets

Food Commodities

• Recent Developments:
  • Food prices index fell by 4% in Q1 2024.
  • Maize and wheat hit three-year lows; rice prices rose due to supply concerns.
• Outlook:
  • Food prices expected to decline by 6% in 2024, 4% in 2025.
  • Risks: weather patterns, geopolitical tensions, input costs.

Beverages

• Recent Developments:
  • Beverage price index reached a five-decade high due to cocoa and coffee price surges.
• Outlook:
  • Prices expected to rise in 2024 then decline in 2025.
  • Risks: La Niña affecting weather conditions.

Raw Materials

• Recent Developments:
  • Cotton prices rose slightly; natural rubber prices increased by 8%.
• Outlook:
  • Prices expected to edge down in 2024, rise in 2025.

Metals and Minerals

Base Metals

• Recent Developments:
  • Copper prices climbed 3% in Q1 2024.
• Outlook:
  • Prices anticipated to hold steady in 2024, rise in 2025.
  • Risks: Chinese economic activity, global demand fluctuations.

Precious Metals

• Recent Developments:
  • Gold prices surged to all-time highs in April.
• Outlook:
  • Gold prices projected to rise by 8% in 2024, then stabilize.

Special Focus: Forecasting Industrial Commodity Prices

• Evaluation of five forecasting approaches: bivariate regressions, BVAR, macroeconometric models, machine learning, and Consensus forecasts.
• No single approach consistently outperforms others.
• Long-term forecasts benefit from macroeconometric models.
• Importance of incorporating judgment and multiple approaches.

Implications for Policy and Economic Stability

• Persistent high commodity prices despite sluggish global GDP growth.
• Need for diversified approaches in forecasting to prepare for volatility.
• Importance of scenario analysis to incorporate potential shocks and changes in global economic conditions.

Source: World Bank Commodity Markets Outlook, April 2024