Commodity Markets Outlook, April 2025

Overview & Synopsis

Commodity prices are set to fall sharply this year, by about 12 percent overall, as weakening global economic growth weighs on demand. Next year, commodity prices are projected to decline by another 5 percent, reaching a six-year low. Oil prices are expected to exert substantial downward pressure on the aggregate commodity index in 2025, as a marked slowdown in global oil consumption coincides with expanding supply. The anticipated commodity price softening is broad-based, however, with more than half of the commodities in the forecast set to decrease this year, many by more than 10 percent. The latest shocks to hit commodity markets extend a so far tumultuous decade, marked by the highest level of commodity price volatility in at least half a century. Between 2020 and 2024, commodity price swings were frequent and sharp, with knock-on consequences for economic activity and inflation. In the next two years, commodity prices are expected to put downward pressure on global inflation. Risks to the commodity price projections are tilted to the downside. A sharper-than-expected slowdown in global growth - driven by worsening trade relations or a prolonged tightening of financial conditions—could further depress commodity demand, especially for industrial products. In addition, if OPEC+ fully unwinds its voluntary supply cuts, oil production will far exceed projected consumption. There are also important upside risks to commodity prices. Economic growth prospects could improve if trade barriers are rolled back in a lasting manner, leading to stronger commodity demand and higher prices. Commodity prices could otherwise rise if geopolitical tensions worsen, threatening oil and gas supplies, or if extreme weather events lead to agricultural and energy price spikes.