Resilient Service Sector Drives Oil Demand: Goldman

The resilient global service sector will continue to drive global oil demand this year and will amongst other factors lead to a oil market supply deficit of around 1.5mbpd in the second half of this year according to a note from Goldman Sachs.

• The service sector is still growing at a robust pace as there is still some room for recovery, including from China, the note said.
• According to the bank, services GDP drives 70% of global oil demand. Specifically, the bank estimates that 1% increase in global services GDP will boost global oil demand by around 0.6%, or 620kbpd. A 1% increase in global goods GDP drives global oil demand up by around 0.25%, or 255kbpd.
• The importance of services for oil demand and the fact that services activity still has some room to grow together also support the bank’s forecasts that global oil demand is likely to rise by 1.6mbpd this year (Q4-Q4), contributing to deficits averaging 1.5mbpd in 2H, along with OPEC cuts.
• Global oil demand has moderately beaten consensus expectations over the past year and supports the bank’s forecast that rising oil demand and OPEC cuts will cause 2H deficits.