A client note on oil from GS, in brief:

  • Oil market rebalancing continues to beat the bank’s above-consensus expectations
  • Market expected an average deficit of 0.9m b/d during H1 of 2021, compared with a previous forecast of 0.5m
  • Data for late 2020 indicate a 2.3m b/d deficit in 4Q, driven by higher demand and lower non-OPEC+ supply
  • A tighter starting point for 2021 more than offsets a slower assumed recovery in demand, particularly for jet
  • GS still expects global oil demand to reach its pre-virus level of 100m b/d by August, despite remaining cautious on China’s recovery
  • 1Q 2021 demand forecast at 93.8m b/d, only 0.7m b/d lower than previous estimate, despite longer European lockdowns and lower global jet demand as governments restrict travel
  • Lack of higher drilling activity at current price levels creates clear downside risks to bank’s non-OPEC+ production forecast; may help offset the potential for a slowed demand recovery in early 2022 should mutations reduce vaccine efficacy

Info from GS via Bloomberg report.