Energy prices suffered the most among commodities in the pandemic—especially oil prices—and they won’t be rising much next year either, averaging just $44 a barrel, the World Bank said in its semi-annual Commodity Markets Outlook report on Thursday.

While agricultural and metal commodities have already recouped losses from COVID-19, oil prices will not recover to pre-pandemic levels at least until 2022, according to the World Bank.

“Notwithstanding steep production cuts, the recovery in oil prices has stalled recently amid concerns about renewed COVID-19 infections and their impact on oil consumption,” the bank said in its report.

Next year, oil demand in almost all countries will still be lower than in 2019, except in China, and as a result, oil prices will not move much higher than today’s levels in the low $40s.

The World Bank expects oil to average $44 per barrel next year, slightly up from an expected average of $41 a barrel this year. The projected 2021 average will still be significantly lower than the 2019 average oil price level of $61 a barrel.

“High levels of inventories are expected to continue to unwind over the forecast, and will keep oil prices below $50 until 2022,” the World Bank said.

In addition, OPEC+ countries have significant levels of spare production capacity, which further reduces the likelihood of sharply higher prices in the near term.

Natural gas prices, however, are seen rising in 2021 as consumption recovers in line with the global economy, according to the bank.

Like many other forecasters, the World Bank sees the risks for oil skewed to the downside. For demand, the pandemic is the biggest risk, while the return of Libyan production is a risk to oil prices on the supply side.  

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A potential upside could be OPEC+ not easing the cuts from January as planned, but extended cuts at current levels could be politically difficult to achieve, as many oil producers in the pact had their finances hit hard by the oil price crash and the pandemic, the World Bank said. 

By Tsvetana Paraskova for Oilprice.com

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