Oil prices started the week on a bullish note as the market prices in a number of price-positive developments. But breaching 60 dollars is also a psychological achievement.

Since the Covid-19 pandemic began, oil prices were thrown in a sea of uncertainty, diving deeper and deeper and reaching record lows.

Managing to breach 60 dollars again feels like the market is finally resurfacing after the long struggle and takes a proper breath, it offers a feeling of normality again.

The resurfacing of the 60-dollar oil price is not without any help though, it still cannot keep afloat on its own.

OPEC and Saudi Arabia in particular are providing support, with the coming US stimulus package also assisting the recovery effort.

Breaching 60 dollars is significant, it definitely raised eyebrows in the whole energy world and strategists may start increasing investments proposals again due to the healthy price levels.

The real question is when will the oil price stop needing OPEC and US crutches to keep such levels and the answer is related to the recovery pace of oil demand. And demand is still not at pre-Covid-19 levels, even if prices are.

Back on what’s moving prices today, oil traders can’t ignore that Saudi Arabia started its deeper output curtailments last week, and that’s a million dollar barrel difference in the market’s real flows.

Seeing the first signs of global supply shortening is a confidence boost for traders and it is naturally providing extra support to the market, even if the event itself was expected and mostly priced in.

Saudi Aramco also raised selling prices to Europe, which also was a supporting slap on the shoulder for the whole market to rethink of its pricing.

Traders seem to believe the OPEC and Saudi support are enough to balance the hurt demand, but not only! The market is seeing storage levels falling week after week, which is a big relief and a natural major boost for prices, justifying the overall sentiment today.

In the US, a 1.9 trillion-dollar injection will give the economy a spectacular boost and the industry will end up with more funds than it was planning to spend, and having to spend them. Naturally oil demand will rise together with industrial activity.

Although expectations for the stimulus package have moved the market since several weeks now, the actual development seems to be getting closer and closer, with the Democrats seemingly happy to pass that even without republican support.

But US politics offered another helping hand to oil over the weekend. The new US administration hinted that Iran sanctions will not be lifted just for the country to return to the negotiating table.

Iran was hoping for a quick resolution and withdrawal of the US sanctions, to push more oil in exports, a development that now seems to need more time to happen than Iran hoped. And not bringing back Iranian oil is also a support to prices.

Nevertheless, as mentioned above, the 60-dollar price level is providing enough oxygen for the oil market to breath confidently.

However, such a price level will be more secure when OPEC+ and Saudi support are no longer needed and that is certainly taking some time to happen given the current demand trajectory.

Vaccine campaigns need to speed up and infection rates to fall for road and jet fuel demand to recover. When that happens OPEC’s helping hand can then rest and the market can feel the pandemic is behind it. And we are not there yet.