Oil prices are finally pricing in the full boost from the long-awaited US stimulus bill, rising on the prospect of extra spending and its related market benefits.

The market has already been trading on the expectation that the stimulus package would come, but delays and political hiccups had made its timing and contents uncertain, so having more clarity is welcome.

The fact that the US House finally passed the bill is a crucial step and now markets finally rejoice on solid ground.

Oil prices are naturally moving as spending is expected to rise in industrial and social activity, naturally creating more demand for oil.

The oil price rally is supercharged by the political news from the US. Although the $1.9 million US stimulus package still needs to move onto the Senate, it is poised to pass.

Recovering equities markets are also helping the oil market. The swift recovery of Asian and European equity indices, up about 2%, is in line with the 2% rise in oil prices since Friday, which dropped on last week’s panic over the bond market selloff.

Although not the prime price mover today, the approval of Johnson & Johnson’s single shot Covid-19 vaccine is adding an extra weapon in the fight against the pandemic and is putting the cherry – if one was even needed today – on the bullish trader’s cake.

Even though the oil market is enjoying some of its happiest days since the pandemic hit it, there are bearish clouds in the horizon.

A higher oil price environment, an increasingly promising demand picture by summer, and the recovering but still growing US oil production outlook for 2021 should give OPEC+ the confidence to slightly increase supply, though we expect the increase to be limited and in line with the current policy to not bring back more than 500,000 bpd on a monthly basis.

Higher prices will give the supply hawks of the group, led by Russia, more justification in calling for more supply sooner.

In a higher oil price environment, Russia will also have more sympathetic ears towards its call for increasing supply, which will jilt the group dynamics away from the cautious approach led by Saudi Arabia, the main bullish environment creator.

This week’s OPEC+ meeting will clarify what supply can be expected from the alliance from April and whenever more supply is coming back, prices naturally take a step back. If the  returning supply does not exceed 500,000 bpd though, the effect will be nearly neutral, as no trader can really expect OPEC+ to keep its cuts forever.

A return of the OPEC+ machine is something the market expects and it would take some wild numbers to send prices moving by panic margins again.

The saying has it that ‘gifts’ cannot be returned, but the Saudi Arabian additional million-barrel cuts that are supporting prices for February and March are all but unsure to be kept after March.

If Saudi Arabia decides to bring the extra barrels back to production, that is naturally a bummer for prices and the news could drag them down. Nothing prevents the kingdom from doing that as these were voluntary and all eyes will wait for the Saudis to announce their plans in this week’s meeting.

Last but not least, on the crude supply front, we just entered March and refinery maintenance season is starting for many facilities, meaning some demand is expected to be taken off, not exactly helping oil prices.

In China, factory activity growth reached a multi-month low, a bearish sign for the major oil importer, whose thirst for oil has been the front horse in the oil demand recovery.

Going forward though, the clear piece of news that will determine more or less the price level going forward is the OPEC+ meeting and all market observers will be trading on leaks and news of its outcome this week.

OPEC+ has both the cake and the knife and since the beginning of the pandemic, it runs the oil price recovery show.