Commodity Markets Outlook: Implications of COVID-19 for Commodities

Almost all commodity prices saw sharp declines during the past three months as the COVID-19 pandemic worsened. Mitigation measures have significantly reduced transport, causing an unprecedented decline in demand for oil, while weaker economic growth will further reduce overall commodity demand. Crude oil prices are expected to average $35/bbl this year and $42/bbl in 2021—a sharp downward revision from October in both years. Non-energy prices are also expected to fall this year. Metals are projected to decline more than 13 percent in 2020, before recovering in 2021 while food prices are expected to be broadly stable. The risks to the price forecasts are large in both directions and depend on the speed at which the pandemic is contained and mitigation measures are lifted. A Special Focus investigates the impact of COVID-19 on commodity markets and compares it with previous disruption episodes. It finds that the impact of COVID-19 has already been larger than most previous events and may lead to long-term shifts in global commodity demand and supply. A Box examines the impact of international commodity production agreements, with a particular focus on OPEC, and concludes that OPEC+, the last remaining international agreement to manage supply, is subject to the same forces that led to the collapse of its predecessors.