KUALA LUMPUR (April 23): Well-supplied markets are continuing to drive down prices of commodities, across the board, according to a World Bank report.

In the latest issue of its Commodity Markets Outlook (CMO) released yesterday, the World Bank said most indices edged further down during the first quarter of 2015, with food down 7.3%, crude oil down 13% and metals down 9% compared to the fourth quarter of 2014.

The Bank said prices were expected to stay weak for the rest of this year, with only a marginal recovery expected in 2016.

World Bank’s Development Prospects Group director Ayhan Kose said surplus production and subdued demand due to weak global growth are continuing to depress commodity prices.

“The slowdown in emerging economies, coupled with a strong U.S. dollar, will likely keep the lid on prices.

“Although weaker prices will mean lower revenues for commodity exporting countries, they will help reduce current account and fiscal deficits in many commodity-importing countries,” said Kose.

According to the CMO, crude oil averaged US$51.6 per barrel in the first quarter of 2015, down from US$74.6 per barrel in the previous quarter.

The report said prices appeared to have stabilised during March and early April, however, as demand has been higher than expected, partly due to the effects of lower prices and cold weather.

However, the CMO added that production was growing as OPEC continued to pursue the strategy of retaining market share (instead of price targeting) adopted at its November 27, 2014 meeting.

The report said U.S. production also continued to climb by more than 1 million barrels a day (mb/d) year-on-year, despite a halving of the U.S. rig count – a rough measure of future supply – in the past five months.

The World Bank’s forecast for oil prices for this year and next remains unchanged from its January 2015 forecast of US$53 per barrel for 2015 and a marginal recovery to US$57 in 2016.

Downside risks for all fuel markets are driven primarily by the higher-than-expected production that would occur in the event Iran returns to the global oil markets following agreement on a nuclear deal.

World Bank senior economist and lead author of the CMO John Baffes said that oil prices had declined dramatically and could stay low for the short and medium term if the current episode mimics the 1985-86 oil price collapse.

“We already see many parallels between now and the mid-80s plunge, including the increase in non-OPEC output, OPEC’s changing objectives, and the relatively high prices prior to these two episodes,” he said.