The World Bank has cut its price forecast for 80 percent of the world's major commodities as oversupply and weaker emerging market growth prospects weigh on demand.
In its latest report, out Tuesday, the bank has cut its 2016 forecast for crude oil prices to $37 per barrel, down from $51 per barrel in its October report, citing the sooner-than-anticipated resumption of exports by the Islamic Republic of Iran and greater resilience in U.S. production.
Oil prices fell by 47 percent in 2015 and are expected to decline, on an annual average, by another 27 percent in 2016, according to the World Bank.
The bank, which serves as a key lender to developing countries, said it anticipated a gradual recovery in oil prices over the course of the year, describing the sharp oil price drops at the end of 2015 and early 2016 as not "fully warranted by fundamental drivers of oil demand and supply."
"High-cost oil producers are expected to sustain persistent losses and increasingly make production cuts that are likely to outweigh any additional capacity coming to the market. Demand is also expected to strengthen somewhat with a modest pickup in global growth," the bank said it is latest commodity markets outlook, published on Tuesday.
Oil prices tumbled to $28 earlier this month, lows not seen since 2003, on expectations that the market would flooded by renewed supplies from Iran after sanctions were lifted against Tehran. Prices continued to hover around $30 per barrel on Tuesday.
Beyond oil markets, all main commodity price indices are expected to fall in 2016 due to persistently large supplies, and in the case of industrial commodities, slowing demand in emerging market economies. In all, prices for 37 of the 46 commodities the World Bank monitors were revised lower for the year.
Commodity demand growth has come predominantly from emerging economies since 2000, the bank said, and weakening growth prospects in these markets is hurting the outlook for commodity prices.
"Low commodity prices are a double-edged sword, where consumers in importing countries stand to benefit while producers in net exporting countries suffer," said Ayhan Kose, director of the World Bank's Development Prospects Group.
"It takes time for the benefits of lower commodity prices to be transformed into stronger economic growth among importers, but commodity exporters are feeling the pain right away," he said.
Non-energy prices are expected to slip 3.7 percent in 2016, with metals dropping 10 percent after a 21 percent fall in 2015, due to softer demand in emerging markets and gains in new capacity, the bank said.
El Niño-related concerns in some regions have also dented prices on global commodity markets, with agriculture prices projected to decline 1.4 percent, with decreases in almost all main commodities groups.