Global oil prices are set to plunge to the lowest level in five years in 2025 as a massive supply glut buffers the market from geopolitical disruptions, according to the World Bank.
In its latest Commodity Markets Outlook, the lender forecasts Brent crude will slump to 73 dollars a barrel next year as oversupply averages 1.2 million barrels daily through 2025. That would mark one of the era's biggest gluts following pandemic-driven demand destruction.
The projected price plunge from this year's 80 dollars average offers a boon for import-dependent developing economies still grappling with inflation and recent global economic shocks. Ethiopia in particular could gain relief as it phases out gasoline subsidies that leave consumers vulnerable to volatility.
"Falling commodity prices and better supply conditions can provide a buffer against geopolitical shocks," said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President. "But they will do little to alleviate the pain of high food prices in developing countries where food-price inflation is double the norm in advanced economies."
Flat Chinese consumption and rising electric vehicle usage are weighing on fuel demand, while OPEC+ and other producers outside the alliance retain around 7 million barrels in spare capacity to respond to upside price shocks, according to the bank.
From 2024 through 2026, global commodity prices are projected to plummet by nearly 10 percent. Global food prices are set to fall nine percent this year and an additional four percent in 2025 before levelling off. That would still leave food prices nearly 25 percent above the average level from 2015 through 2019.
While the report warns an escalation like the 2011 Libyan war or 2003 Iraq conflict might spark a temporary 92 dollars spike in prices of fuel, surplus supply means higher costs would prove short-lived. That resilience supports the view geopolitics' grip on oil is easing.
"The good news is that the global economy appears to be in much better shape than before to cope with a significant oil shock," said Ayhan Kose, the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group.
