The World Bank on Thursday said lower demand for crude oil may persist beyond 2021.
It stated that while metal and agricultural commodities had recouped their losses from the COVID-19 pandemic and were expected to make modest gains in 2021, energy prices, despite some recovery, were expected to stabilise below pre-pandemic levels next year.
Oil prices fell dramatically in the early stages of COVID-19 and have only partially regained pre-pandemic price levels.
Metal prices on the other hand, declined relatively modestly and have returned to levels that preceded the shock, according to the semi-annual Commodity Markets Outlook report, as stated by the bank.
The bank stated that agricultural produce prices were relatively unaffected by the pandemic, but the number of people at risk of food insecurity had risen as a result of the broader effects of global recession.
“The impact of COVID-19 on commodities has been uneven, and could have lasting effects for energy markets,” World Bank Group Acting Vice President for Equitable Growth, Finance and Institutions and Director for the Prospects Group, Ayhan Kose, said.
He added, “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.”
He stated that because of COVID-19, the new normal for oil-exporting emerging and developing economies arrived earlier.
Kose explained that in the post-COVID world, these countries need to be more aggressive in implementing policies to reduce their reliance on oil revenues.
The bank said oil prices were expected to average $44 per barrel in 2021, up from an estimated $41 per barrel in 2020.
It said demand was expected to rise only slowly as tourism and travel continued to be held back by health concerns and as global economic activity was anticipated to return to pre-pandemic levels only in the year after next.
It said supply restraint was 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,” the bank said.