Global oil price will average $84 per barrel in 2024 – WB
A pump attendant fills a fuel pump in Kampala. International fuel prices are largely determined and dependent on past crude prices, say six months or a year ago. PHOTO/Abubaker Lubowa
What you need to know:
- This means that if this projection comes to pass, net oil-importing countries like Uganda will not face many constraints related to high oil prices like it was in mid-2022.
The World Bank’s forecasts for commodity prices in 2024 have indicated that Brent crude oil prices will average $84 per barrel in 2024 before declining to an average of $79 in 2025, assuming no conflict-related supply disruptions.
In the Commodity Markets Outlook report released on April 24 in Washington DC, the World Bank said the energy price index is expected to edge down 3 per cent year on year (y/y) in 2024 and ease a further 4 per cent in 2025.
This means that if this projection comes to pass, net oil-importing countries like Uganda will not face many constraints related to high oil prices like it was in mid-2022.
In the Market Outlook report, the World Bank said the price of Brent crude oil, for example, surged to $91 per barrel earlier this month -- nearly $34 per barrel above the 2015-2019 average.
Between mid-2022 and mid-2023, global commodity prices plummeted by nearly 40 per cent. This helped to drive most of the roughly 2-percentage-point reduction in global inflation between 2022 and 2023.
Since mid-2023, however, the World Bank’s index of commodity prices has remained essentially unchanged. It points out that the pace of decline in commodity prices will do little to subdue inflation that remains above central bank targets in most countries.
The World Bank is also conscious that it will keep commodity prices about 38 per cent higher than they were on average in the five years before the COVID-19 pandemic.
The World Bank Group’s Chief Economist and Senior Vice President, Dr Indermit Gill said global inflation remains “undefeated”
“A key force for disinflation—falling commodity prices—has essentially hit a wall. That means interest rates could remain higher than currently expected this year and next. The world is at a vulnerable moment; a major energy shock could undermine much of the progress in reducing inflation over the past two years,” he said.
Similarly, the World Bank stated that a moderate conflict-related supply disruption could raise the average Brent price this year to $92 per barrel. Stressing that a more severe disruption could see oil prices surpass $100 per barrel, raising global inflation in 2024 by nearly one percentage point.
“A striking divergence is emerging between global growth and commodity prices: despite relatively weaker global growth, commodity prices will most likely remain higher in 2024-25 than in the half-decade before the COVID-19 pandemic,” said Dr Ayhan Kose, the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group.
Adding: “One critical factor behind this divergence relates to heightened geopolitical tensions that are keeping upward pressure on prices of major commodities and stoking risks of sharp price movements. Central banks must remain alert about the inflationary implications of commodity-price spikes amid elevated geopolitical tensions.”
The World Bank has also stated that the average price of gold—a popular choice for investors seeking “safe haven”—is expected to hit a record in 2024 before moderating slightly in 2025. Gold holds a special status among assets, often rising in price during periods of geopolitical and policy uncertainty, including conflicts. Strong demand from several developing-country central banks, along with heightened geopolitical challenges, is expected to bolster gold prices throughout 2024.
