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Commodity Markets Outlook: World Bank
- 24 Apr 2020
- 3 min read
Why in News
According to the World Bank’s April 2020 Commodity Markets Outlook, Covid-19 is expected to bring most commodity prices down substantially in 2020.
- However, it also says that the outlooks are “exceptionally uncertain” and depend on the severity and duration of the pandemic and when mitigation measures are taken.
- Worst Hit
- Energy and metals commodities are the most affected by the sudden stop to economic activity and the serious global slowdown that is anticipated.
- Commodities associated with transportation, including oil, have experienced the steepest declines.
- Agricultural prices are likely to stay broadly stable in 2020 because of relatively stable demand and all-time high levels of staple production and stock.
- However, supply chain disruptions and government steps to restrict exports or stockpile commodities raise concerns that food security may be at risk in places.
- Gold prices were up 6.9% in the last quarter (January- March,2020) – its sixth consecutive quarterly rise.
- The strong investor demand propped gold up despite weak jewelry demand in India and China.
- Oil Prices: These are expected to average at $35 per barrel in 2020.
- The decline in crude oil prices has been exacerbated by uncertainty around production agreements among the Organization of the Petroleum Exporting Countries (OPEC) and other oil producers.
- Impact on Importers and Exporters: They are likely to see some long-term shifts in their markets due to the pandemic. These include
- Increasing transport costs due to enhanced border checks and thus impact on supply chains.
- Substituting for imports with domestic goods: Companies might prefer to source from closer by for instance.
- Other Observations: Changing consumer behaviour, for instance, people may choose to work remotely, travel less, and this could impact permanent drops in demand for oil, favourably impacting the accounts for oil importers.
- The reduction in emissions of the harmful gases caused by the restrictions may also increase public pressure for greener transport and lowered fossil fuel use.
Commodity Markets Outlook
- It provides market analysis for major commodity groups - energy, metals, agriculture, precious metals, and fertilizers.
- The report forecasts prices for 46 key commodities, including oil.
- It is published by the World Bank in April and October.