Oil demand concerns overdone, Brent to rally above $70 per bbl: Goldman

Higher oil demand coupled with declining production and supply cuts could help Brent prices rally above $70 per barrel in the near term, Goldman Sachs said.

Demand is off to a strong start in 2019, with recent oil data suggesting current demand concerns should ease further, Goldman said in a note on Thursday.

Based on available demand data that shows an increase in consumption in January of 1.55 million barrels per day (bpd) from a year earlier, the US bank estimates that overall global demand increased by nearly 2 million bpd during the month. This growth was visible in both emerging and developed markets.

Meanwhile, supply losses in 2019 are large with producers in the Organization of the Petroleum Exporting Countries (OPEC) exceeding their cut commitment and on accelerating declines in Venezuelan output, Goldman said.

"The political stalemate in Venezuela increasingly creates risks that the decline in output due to the U.S. oil sanctions more than offsets the rebound in Libya, which would bring global output below our expectations and further tighten heavy crude supplies," it added.

Oil prices were stable on Friday, propped up by production cuts led by OPEC and as U.S. sanctions against Venezuela and Iran likely created a slight deficit in global supply in the first quarter of 2019.

Crude oil prices are on course for the best quarter since mid-2016, with a 25 percent gain so far.

"Physical markets have driven the rally in prices this year while net speculative length has remained at depressed levels given high fundamental uncertainty and last year's volatile fourth quarter," Goldman said.

The investment bank expects the current fundamentals to tighten physical markets further, in turn driving the Brent forward curve into further backwardation.

Backwardation is a market structure where prompt prices are higher than later prices and suggests that demand for a commodity is high or that prompt supply has declined.