Oil Price Outlook: Brent Crude to Average $84 in 2024, $79 in 2025
The World Bank (WB) estimates that Brent crude oil prices will average $84 per barrel in 2024, before moderating to $79 per barrel in 2025, assuming no supply disruptions related to conflicts.
According to the WB, the energy price index is projected to decline by 3% year-on-year in 2024 and a further 4% in 2025. This suggests that if these forecasts materialize, net oil-importing countries will face less pressure from elevated oil prices than they did in mid-2022.
Brent crude prices spiked to $91 per barrel in early April 2024, nearly $34 per barrel above the 2015-2019 average. Prices have since eased, currently trading near $84 per barrel.
Between mid-2022 and mid-2023, global commodity prices declined sharply by nearly 40%, contributing significantly to a drop in global inflation by around 2 percentage points during that period.
However, since mid-2023, the WB’s commodity price index has remained largely unchanged, suggesting that the pace of commodity price disinflation will not be sufficient to bring inflation down to most central banks’ targets.
Moreover, commodity prices remain roughly 38% higher today than the five-year pre-COVID-19 pandemic average, leading some experts to argue that the global fight against inflation is “stalling.”
“A central driver of disinflation – lower commodity prices – has essentially hit a wall,” explained Dr. Indermit Gill, World Bank Chief Economist and Senior Vice President. “This means that interest rates may need to stay higher for longer than anticipated this year and next. The world remains vulnerable and a large energy shock could derail much of the progress on inflation reduction achieved over the past two years,” he said.
Similarly, the WB said a moderate conflict-related supply disruption could raise the average Brent price to $92 per barrel this year, emphasizing that more severe disruptions could push oil prices beyond $100 per barrel, increasing global inflation in 2024 by nearly 1 percentage point.
“A notable divergence is emerging between global growth and commodity prices, with the latter likely to remain elevated in 2024-25 relative to the pre-COVID-19 pandemic half-decade, despite relatively weaker global growth,” said Dr. Ayhan Kose, World Bank Director of the Prospects Group.
“A key factor behind this divergence is that heightened geopolitical tensions are putting upward pressure on the prices of key commodities and introducing the risk of large price swings. Central banks need to remain vigilant about the impact of elevated commodity prices on inflation amid heightened geopolitical tensions,” he added.
The World Bank also said that gold prices, a popular safe haven asset for investors seeking refuge, are projected to reach a record high in 2024 before moderating slightly in 2025. Gold holds a unique place among assets, often appreciating in value during periods of policy and geopolitical uncertainty, including conflicts. Strong demand from some emerging market central banks, coupled with heightened geopolitical risks, is expected to support gold prices throughout 2024.
Source: Monitor
