Oil demand could see “lasting impacts” from the coronavirus while modest gains are projected in metals and agriculture prices as commodity markets recover from the shock of the pandemic, according to the World Bank, APA reports citing Bloomberg.
The World Bank boosted its projections from April for the average oil price in 2020 and 2021 to US$41 a barrel and US$44, respectively, as a slow recovery in demand is matched by an easing in supply restrictions. That still leaves prices well below 2019 levels of US$61. Outside of energy, a small decline in metal prices will be offset by an increase in agricultural prices this year.
The recovery in oil prices following April’s price rout has stalled as the resurgent coronavirus spurs governments to rethink reopening plans. The Bloomberg Commodity Index has risen 24 per cent from a March low, but is still down almost 9 per cent this year. While stimulus can help buffer the impact, COVID-19 presents a challenge to commodity exporters, and policy makers need to allow economies to adjust smoothly to a “new normal” should the pandemic persist.
The pandemic could also have “lasting impacts” on oil demand through changes in consumer and employment behavior, according to the report. Air travel could see a permanent reduction, as business travel is curtailed in favor of remote meetings, reducing demand for jet fuel.
“In the post-Covid world, these countries need to be more aggressive in implementing policies to reduce their reliance on oil revenues,” said Ayhan Kose, director of the Prospects Group at the institution.