Measuring sectoral impacts of COVID-19 pandemic continue to suggest that oil demand decline will persist through 2021.
While metal and agricultural commodities recouped their losses from the COVID-19 pandemic and expected to make modest gains in 2021, energy prices, despite some recovery still stabilize below pre-pandemic levels next year, the World Bank said Thursday.
Oil prices fell dramatically in the early stages of COVID-19. And they have only partially regained pre-pandemic price levels. The World Bank’s semi-annual Commodity Markets Outlook report revealed this.
The prediction for oil prices indicates an average of 44 U.S. dollars per barrel in 2021. Thus, they are up from an estimated 41 dollars per barrel in 2020, the report showed. However, previous data showed that oil price averaged 61 dollars per barrel in 2019.
The oil demand is expected to rise “only slowly.” Especially, 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, the report said. The report, furthermore, indicated that steady easing of supply restraint will occur.
Energy prices overall — which also include natural gas and coal — will rebound sizably in 2021 as shown by the report.
Additionally, the report warned that a resurgence of a second wave of the pandemic. Consequently, resulting in more lockdowns and less consumption, and delays in vaccine development and distribution. Therefore, these could lead to lower energy prices than forecast.
“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,” said Ayhan Kose, World Bank Group acting vice president for Equitable Growth, Finance & Institutions and director for the Prospects Group.
“Because of COVID-19, the new normal for oil-exporting emerging and developing economies arrived earlier,” Kose said. “In the post-COVID world, these countries need to be more aggressive in implementing policies to reduce their reliance on oil revenues.”
Oil demand decline does not affect some commodities
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, the report noted. Furthermore, adding that a prolonged period of weak global growth would lead to lower prices than forecast.
Agriculture prices, meanwhile, were relatively unaffected by the pandemic. However, the number of people at risk of food insecurity has risen as a result of the broader effects of the global recession, according to the report.