It’s been a long time since something different to Covid-19 and OPEC is making oil markets move.

Oil prices are slightly rising this morning as harsh weather has shut oil output in the Gulf of Mexico, bringing supply lower than the market expected.

Yet it is worth noting that the price move is marginal, when one thinks of the amount of output that is shut. Today is more of an opportunity to see that even such a sudden event is weak to really put aside the concerns that Covid-19 has brought upon market participants.

Yes, a dip in oil production provides a breath to traders, who have been seeing global output rising over the last weeks, amid a demand recovery lag. But what will really make a difference is news from the recovery front. 

Rising beyond the 40-45 dollar price range will be very difficult for oil this year, it would take either a significant change in production or an unlikely collapse of the pandemic.

As the latter is not anticipated, supply is paramount to understand how the market moves.

Bad weather news is good news for bullish market participants and a forced production decline in the Gulf of Mexico these days is exactly what traders needed to drive prices a bit higher.

As we mentioned, normally, such a weather phenomena could have an even wider impact on prices, but Covid-19 concerns are making price moves a bit more careful.

On the demand side, not all is dark this week. The US administration has hinted that the country is looking into introducing vaccines and treatments sooner than people expected.

A quick return to normality, if the economy returns to its pre-Covid-19 status, will boost oil demand, especially demand coming from road and air transport.

However, as Rystad Energy, amid increasing COVID-19 cases globally, we find it unlikely for demand recovery to already pick up momentum this year, and that will knock down possible oil price gains in the short term.

In addition, prices will be further weighed down by the prospect of global supply increasing faster than required, despite short-term weather phenomena that provide some relief.