Impact of COVID-19 on Commodity Markets Heaviest on Energy Prices; Lower Oil Demand Likely to Persist Beyond 2021

Must Read

How To Block Your Bank Account And SIM Card In Case Of Emergency

Losing your phone and wallet or having them stolen can be very frustrating. However, in case that happens to...

Ibadan-Born Billionaire, Harry Akande is dead

Harry Ayoade Akande has died at the age of 77. He died on Saturday morning of an undisclosed ‘brief...

List of Access Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number which usually identifies both the bank and the branch where an account is...
- Advertisement -

Most other commodities regained losses after pandemic; seen stabilizing next year

WASHINGTON, Oct. 22, 2020 – While metal and agricultural commodities have recouped their losses from the COVID-19 pandemic and are expected to make modest gains in 2021, energy prices, despite some recovery, are expected to stabilize below pre-pandemic levels next year, the World Bank said.

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, according to the semi-annual Commodity Markets Outlook report. Agriculture prices were relatively unaffected by the pandemic, but the number of people at risk of food insecurity has risen as a result of the broader effects of the global recession.

Impact of COVID-19 on Commodity Markets Heaviest on Energy Prices; Lower Oil Demand Likely to Persist Beyond 2021 Brandspurng

“The impact of COVID-19 on commodities has been uneven, and could have lasting effects for energy markets,” said Ayhan Kose, World Bank Group Acting Vice President for Equitable Growth, Finance & Institutions and Director for the Prospects Group. 

“When declines in commodity prices are short-lived, policy stimulus can buffer their impact. However, when prices remain depressed for an extended period, policymakers need to find solutions so their economies can adjust smoothly to a new normal. Because of COVID-19, the new normal for oil-exporting emerging and developing economies arrived earlier. In the post-COVID world, these countries need to be more aggressive in implementing policies to reduce their reliance on oil revenues.”

- Advertisement -

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. Supply restraint is expected to be eased steadily.

Energy prices overall —which also include natural gas and coal—are expected to rebound sizably in 2021, following large declines in 2020, an upward revision from April’s forecast. A resurgence of a second wave of the pandemic that results in more lockdowns and less consumption, and delays in vaccine development and distribution, could lead to lower energy prices than forecast.

Metal prices are expected to post modest increases in 2021 after falling in 2020, supported by the ongoing recovery in the global economy and continued stimulus from China. A prolonged period of weak global growth would lead to lower prices than forecast.

Read Also:  Inflation climbed higher in October…Headline inflation up by 14.23% YoY

Agriculture prices are expected to rise slightly in 2021, following an estimated 3% increase in 2020 following some shortfall in edible oil production. Concerns about food insecurity remain relevant in several emerging market and developing economies. These concerns are prompted by hits to incomes from the global recession, bottlenecks in food availability at the local level, and border restrictions that have constrained labour supply. Food price inflation has spiked in several countries.

- Advertisement -

The pandemic is only the latest in a long history of shocks to commodity markets. A Special Focus looks at the nature of commodity price shocks on 27 commodities during 1970-2019. It finds that highly persistent (“permanent”) and short-lived (“transitory”) shocks have contributed almost equally to commodity price variation, although with wide variety across commodities.

Read Also:  Slow recovery of broader macroeconomy extends PMI contraction

Permanent shocks account for most of agricultural commodity price variability while transitory shocks are more relevant in industrial commodity prices. The varied durations of such shocks points to a need for policy flexibility.

A transitory commodity price shock may call for stimulative fiscal policy to smooth consumption; countries that depend on exports of commodities subject to cyclical price swings may want to build fiscal buffers during the boom phase and use them in the bust period to support economic activity.

In countries that rely heavily on commodities that are subject to permanent shocks, structural policies such as economic diversification and broadening the tax base may be needed to facilitate adjustments to new economic environments.

- Advertisement -

The World Bank Group, one of the largest sources of funding and knowledge for developing countries, is taking broad, fast action to help developing countries strengthen their pandemic response. It is supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs.

The World Bank Group is making available up to $160 billion over a 15-month period ending June 2021 to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans and $12 billion for developing countries to finance the purchase and distribution of COVID-19 vaccines.

- Advertisement -
Impact of COVID-19 on Commodity Markets Heaviest on Energy Prices; Lower Oil Demand Likely to Persist Beyond 2021 - Brand SpurImpact of COVID-19 on Commodity Markets Heaviest on Energy Prices; Lower Oil Demand Likely to Persist Beyond 2021 - Brand Spur

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

- Advertisement -

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Impact of COVID-19 on Commodity Markets Heaviest on Energy Prices; Lower Oil Demand Likely to Persist Beyond 2021 - Brand SpurImpact of COVID-19 on Commodity Markets Heaviest on Energy Prices; Lower Oil Demand Likely to Persist Beyond 2021 - Brand Spur

Latest News

Ibadan-Born Billionaire, Harry Akande is dead

Harry Ayoade Akande has died at the age of 77. He died on Saturday morning of an undisclosed ‘brief...

NSE ASI Revs by 0.72% on Insurance, Oil/Gas Stocks

In line with our expectations, investors in the equities market remained bullish, especially on insurance and oil & gas stocks. Hence, the All-Share Index...

Red Hat Releases 2021 Global Tech Outlook Survey

For the fifth consecutive year, Red Hat has released its annual Global Tech Outlook. This survey of IT leaders covers the top IT challenges and funding...

Net Inflow Worth N281.10 billion via OMO Create Liquidity Ease.

In the just concluded week, CBN refinanced only N60 billion of the N341.10 billion treasury bills which matured via the Open Market Operation (OMO)....

Naira Gains against the USD at BDC, Black Markets amid New Forex Policy…

In the just concluded week, Naira gained against the USD at the Bureau De Change (BDC) and parallel (“black”) markets by 4.12% and 4.04%...
- Advertisement -
BrandsPur Weekly Cartoons
- Advertisement -Impact of COVID-19 on Commodity Markets Heaviest on Energy Prices; Lower Oil Demand Likely to Persist Beyond 2021 - Brand SpurImpact of COVID-19 on Commodity Markets Heaviest on Energy Prices; Lower Oil Demand Likely to Persist Beyond 2021 - Brand Spur