The world's appetite for oil and gasoline is growing faster than many forecasters expected, putting Brent crude on pace to top $70 a barrel, Goldman Sachs says.
The investment bank says oil demand grew by 1.55 million barrels per day in January alone, a strong result despite a tough comparison with high consumption last year. For the first quarter, Goldman expects global oil demand to grow by nearly 2 million bpd, trouncing its earlier forecast for 1.1 million bpd and driven by consumption in emerging markets.
"We continue to believe that ongoing macro and oil demand concerns are overdone," Goldman analysts said in a research note on Thursday.
The strong demand will likely push Brent crude, the international benchmark for oil prices, above $70 per barrel. The rally has already outstripped Goldman's prior view that Brent would peak at $67.50 in the second quarter. Brent hit a 2019 high above $68 on Thursday.
It will also keep growth for the full year on pace for Goldman's target of 1.45 million bpd, making the bank more bullish than most forecasters.
In China, a key engine for oil demand, oil consumption grew by 340,000 bpd in January and February, according to Goldman. The Chinese also stocked away 360,000 bpd, a buildup that runs counter to seasonal trends, the bank says.
Gasoline demand in particular is surprisingly strong. Over the last three months, Goldman's subsample of consumers shows gasoline consumption growing by 510,000 bpd, the highest reading since May 2016.
Goldman sees catalysts around the world, including the move away from diesel engines in Europe, a value-added tax cut in South Korea and a drop in gasoline prices relative to biofuel in Brazil.
"Any further meaningful rally in oil prices will likely lead to further US pressure to ease" output cuts by OPEC and its allies, Goldman said. "So far, however, the ongoing OPEC 'shock and awe' strategy has shown no signs of wavering after the latest US presidential oil tweet."