Goldman Sachs forecasts the biggest jump in oil demand ever

Published Wed, Apr 28 20218:06 AM EDTUpdated Wed, Apr 28 20219:15 AM EDT

Goldman Sachs is forecasting the largest jump in oil demand on record as the world opens up again amid the Covid-19 vaccination rollout. The firm is raising its outlook on oil based on this expected upswing in demand. "The magnitude of the coming change in the volume of demand — a change which supply cannot match — must not be understated," it said Wednesday in a note to clients. Jeff Currie, Goldman's global head of commodities research, said he expects oil demand to increase by 5.2 million barrels per day over the next six months. This translates to Brent crude futures , the international oil benchmark, hitting $80 per barrel by the third quarter, he said. Brent traded around $66.86 per barrel on Wednesday, while West Texas Intermediate crude futures , the U.S. oil benchmark, stood at $63.47 per barrel. Oil has made a blistering recovery after the demand shock from the pandemic sent WTI tumbling into negative territory for the first time on record last April, although oil has faced some recent weakness. Both contracts are coming off their second negative week in three as a growing number of Covid cases in India prompted fears of demand concerns. But Currie said coming supply constraints mean oil is not taking a larger hit as Covid cases rise in India. As the world begins to return to normal, a jump in demand is to be expected, so that raises the question of why producers haven't scaled up output to match. Currie said that unlike equities, commodities are not forward looking. "The key here is that commodities must price to equate the physical volume demand and supply in the market today — they cannot be forward-looking like equities," he said. Goldman noted that U.S. gasoline demand is now near 2019 levels and jet demand has jumped 20% since March. With more people expected to hit the road once summer comes, the firm believes demand will reach 99 million barrels per day by the third quarter "as the pace of vaccination accelerates in Europe, finally unleashing pent-up travel demand." A rollback in international travel restrictions should also jump-start demand for jet fuel. Goldman forecasts WTI averaging $72.50 per barrel during the second quarter, before climbing to $77 during the third quarter. The firm sees Brent at $75 during the second quarter before advancing to $80 during the second half of the year. Goldman sees other commodities also rallying over the next six months with the group overall gaining more than 13%. The firm sees copper reaching $11,000 per metric ton. It was trading above $9,800 on Wednesday morning. - CNBC's Michael Bloom contributed reporting.

A pumpjack (oil derrick) and oil refinery in Seminole, West Texas.

David Sucsy | Getty Images

Goldman Sachs is forecasting the largest jump in oil demand on record as the world opens up again amid the Covid-19 vaccination rollout.

The firm is raising its outlook on oil based on this expected upswing in demand. "The magnitude of the coming change in the volume of demand — a change which supply cannot match — must not be understated," it said Wednesday in a note to clients.