Oil prices are starting the week on the back foot as traders digest news about downside risks to oil demand and upside risks to supply this morning.

On the demand side, worries of renewed mobility and distancing restrictions in populous places such as London may be introduced puts a damper on demand expectations.

London in itself, with estimated consumption of around 125,000 bpd of road fuel demand and 100,000 bpd of jet fuel demand is already sizeable in terms of demand at risk, but the market may be more concerned about a more widespread second lockdown effect.

On the supply side, the market is digesting whether the positive news from Libya’s NOC this weekend will lead to higher crude exports from the country soon, as NOC lifted its Force Majeure on Saturday, albeit only from “secure facilities”.

There’s still a long and winding road to a full recovery in Libya’s battered oil sector, where 1 million bpd still remains shut-in due to the blockades of the oil infrastructure from ports to fields.

The “Saudi put option”, which was offered last week and which helped oil recover up to the recent trading levels, is in place and supporting prices, but true actions on the ground, including Libya’s recovery, are what will matter for prices.

However, the demand recovery is still the largest uncertainty factor, and a second period of lockdowns would be devastating to oil prices, as inventories are still at high levels compared to normal. 

Therefore, the oil market will keep watching the Covid-19 policy announcement changes and daily global real-time demand indicators, but at least the impression of a more vigilant OPEC+ post the JMMC-meeting reduces the near-term downside risk to price.