Oil prices fell dramatically in the early stages of Covid-19 and have only partially regained pre-pandemic price levels
Energy prices are unlikely to recover from the losses of the Covid-19 pandemic next year as lower oil demand is likely to persist beyond 2021, said the World Bank (WB).
According to the semi-annual Commodity Markets Outlook report of the WB, though metal and agricultural commodities are expected to make modest gains in 2021, energy prices are expected to remain below the pre-pandemic levels in the coming year.
"Oil prices fell dramatically in the early stages of Covid-19 and have only partially regained pre-pandemic price levels, while metal prices declined relatively modestly and have returned to levels that preceded the shock," said the report.
World Bank Group Acting Vice President for Equitable Growth, Finance & Institutions and Director for the Prospects Group Ayhan Kose said, "The impact of Covid-19 on commodities has been uneven, and could have lasting effects for energy markets."
"When declines in commodity prices are short-lived, policy stimulus can buffer their impact. However, when prices remain depressed for an extended period, policy makers need to find solutions so their economies can adjust smoothly to a new normal," he added.
According to a WB press release, "Oil prices are expected to average $44 per barrel in 2021, up from an estimated $41 per barrel in 2020. Demand is expected to rise only slowly as tourism and travel continue to be held back by health concerns and as global economic activity is anticipated to return to pre-pandemic levels only in the year after next."
In 2021, metal prices will experience an increase due to the ongoing recovery of the global economy and continued stimulus from China, said the press release.
The agriculture commodities' prices are also likely to rise next year though there are concerns that food insecurity could be a threat in several emerging market and developing economies, it reads.