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World Bank Forecasts Down Markets for All Major Commodities

Economy

World Bank Forecasts Down Markets for All Major Commodities

markets chart on smartphone

Commodities market chart on smartphone

Thanks to the crash in oil prices recently, producing and extracting other commodities got cheaper. Add to this mix the continued appreciation of the dollar and global economic softness and you have a very unusual situation: all nine major commodities are expected to drop in 2015 and perhaps beyond. This joint drop in all major commodities hasn’t happened since the economic slowdown of 1984-85 and the Asian Financial Crash. We’re definitely living in some interesting times.

The low prices won’t change anytime soon
Interestingly enough, according to the World Bank, there are serious market realities that are getting in the way of any pronounced bounce in commodities pricing anytime soon. Since analysts estimate that shale oil is profitable if oil is priced between $50 to $100 a barrel, it follows that if global crude prices ever start to inch toward the $100 mark, shale, and to a lesser extent Canadian oil sand oil, will drive the price back down closer to the $50 mark.
Bad news for quantitative easing policies
The most public reason why central banks engage in quantitative easing is the fear of deflation. Well, that is precisely what’s happening when the price of the raw materials for products and goods continue to decline. Instead of getting a healthy dose of inflation, quantitative easing’s most visible effect is the inflation in equities value and stock market speculation. This is hardly the kind of effect central bankers had in mind. Regardless, expect intensified speculation against oil and other commodities in the near term.

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