World Bank forecasts a decline in commodity prices as global economy slows.

The commodities market is predicted to fall in 2023 as slower global growth leads to lower prices for energy, metals, and agricultural items, according to the World Bank Group’s latest commodities market study.

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The international banking organization predicts that although energy prices will probably decline in 2023, they will likely stay higher than expected due mostly to an increase in coal prices. Nevertheless, it is anticipated that crude oil prices will moderate to an average of $88 per barrel in the year under review, which is $4 per barrel less than initial forecasts.

The World Bank Group attributed the downward revision to slower global growth and the subsequent weakness in oil demand in 2023, particularly in Europe. It noted that Russian oil exports are expected to fall in 2023 due to additional EU sanctions that started in December 2022 for crude oil and will begin in February 2023 for oil products.

For natural gas, the report titled “Global Economic Prospects” predicted moderate annual average prices in 2023. It also indicated that the demand for natural gas is expected to decline during the year as households and industrial users reduce consumption, while rapid growth in renewable energy generation will help moderate demand for natural gas for electricity generation.

However, the report noted that further price spikes are possible as exports from Russia are envisaged to remain significantly lower than before the onset of the war in Ukraine. More so, competition for liquefied natural gas (LNG) is expected to remain intense at the global level as European countries continue to import large volumes of LNG to replace lower imports from Russia.

“The main downside risk to the energy price forecast is weaker-than-expected global growth.”

“Oil consumption could also be lower as a result of more persistent pandemic-related restrictions in China,” the report stated.

On a similar trend, the report noted that agricultural prices are projected to drop 5 percent in 2023 after rising 13 percent in 2022, largely reflecting better global production prospects and easing input costs, particularly for fertilizers.

However, the World Bank pointed out that upward risks to food prices include the possibility that fertilizer prices will rise in response to higher natural gas prices. It added that the closure of several fertilizer manufacturers in Europe, as well as the effects of a third consecutive year of La Nia in 2022, would result in a bullish impact on food prices.

Metal prices were also projected to decline by 15 percent in 2023, pressured by weakness in China’s property market, resulting in decreased demand in the world’s largest metal-consuming nation.

According to the World Bank, the demand for metals from the renewable and energy sectors, made more competitive by high fossil fuel prices, is likely to remain strong in 2023. It added that metal prices may be higher than expected if elevated energy costs cause smelters to close and reduce production of refined metals.

“Conversely, weaker-than-expected growth, particularly in China, is a downside risk to prices,” the report stated.