Markets are enjoying a relief-rally this morning as the US returns to political normality, brushing away the uncertainty that its election brought last week.

Last week was turbulent and the possibility of a prolonged political turmoil depressed markets, which struggled to interpret the consequences of a disputed election result.

A sense of political certainty today is taken as positive for oil markets and is thus providing a short-term boost, allowing prices to recover levels before facing again the bigger beast, that of Covid-19 and its consequences.

As the change of power in the US will take some time to happen and since the current administration shows bitterness towards the result, a US stimulus package will be challenging to agree upon on the sort-term.

Such a relief package would provide a much needed boost for markets and consequently oil demand, but it now seems a bit distant.

The relief package was something markets have been hoping for, so any gains today are capped by it moving further away in time.

After what felt like the longest week this year, markets are now preparing again to face a grim but more familiar reality.

Covid-19 infection counts are approaching the grim milestone of 50 million cases and 1.25 million fatalities, and every week new countries and regions reinstate lockdowns.

For oil prices at the moment, not rolling back down to mid-30 dollars levels will depend on essentially two indicators:

A key price indicator is how many additional countries will need to lock down and how much more the world’s oil consumption will further decrease from its current 92 million bpd level.

Now it seems just north of 92 million bpd by December is the best case that OPEC+ and other oil producers can hope for, and not without assistance.

Another major event that will determine the fate of oil prices is the conclusions of the next scheduled PEC+ meeting.

Given that global oil production is currently at around 92 million bpd in November, one would need to have quite an optimistic view on oil demand from January onwards, to put forward the 2 million bpd cut tapering from 1 January.

Addressing this issue is exactly what markets are looking for in coming weeks, with the first hints coming on 17 November when the Joint Market Monitoring Committee will meet again to assess market conditions.

No policy decisions will be taken there, but a conclusion on what the de facto leaders of the coalition, Saudi Arabia and Russia, recommend in the official meeting might become clearer – and therefore 17 November may be a very important day in the oil market.

On another front, Libya’s restoration of output continued over the weekend, despite a hiccup in the transport of oil from its biggest field due to a pipeline leak.

Libya’s return is only making the choice easier for OPEC+ to delay its planned production boost if it desires higher prices next year. They key question is whether the coalition will be able to secure a consensus decision, given the flailing state of the economies of several of its members, with Iraq being already on the red from lost oil income.