Markets are the best judges and the only arbiters. They extract a price of their own and make some smile wryly — chewing their own words. Oil pundits, and this scribe is no exception, have been proven wrong underlining once again how professionally hazardous it could be to project future crude market trajectory.

Only weeks ago, as the New Year was about to begin, most felt that the markets were going to stay weak in the short term at least. The fact is — it’s been not.

The unrelenting cold, the Arctic blast as some said, that has disrupted life in large parts of the northern hemisphere combined with the Russian-Belarus rift has turned out to be an explosive recipe for the markets.

Severe winter continues to bite the US and Europe, intensifying the fears for energy supplies. The demand for heating oil has been up 21 percent above average in the US last week, the American Petroleum Institute said.

The conditions sparked concern for energy supplies in Britain too, as gas was cut off on Thursday to almost 100 major firms so as to avert a crisis. “We’ve got plenty of supplies, the gas storage is about 70 percent full,” Environment Secretary Hilary Benn had to appear on television to reassure the British public. With supplies from the North Sea supplemented by imports, “there’s absolutely no need for any domestic customers to worry at all,” he insisted.

And almost simultaneously, energy politics also started to impact the markets. Early last week, Russia briefly cut off supplies to refineries in Belarus, saying later in the day that it had resumed exports. This was, however, enough to upset the markets, bringing to fore the very issue of European energy security while it was in the midst of a severe winter. Russia has repeatedly clashed with its neighbors over energy pricing in recent years. A dispute with Ukraine last winter left EU customers without gas for almost two weeks in the dead of winter, severely straining ties with the European Union.

By plugging the crude supplies — albeit temporarily — Moscow threatened cutting at least $2.5 billion in energy subsidies that prop up the economy of Belarus. The brief stoppage of Russian crude to refineries in Belarus threatened Belarus’ lucrative exports of oil products refined from Russian crude. The row with Russia centered on oil duties paid for millions of tons of oil that Belarus has imported from Russia with steep discounts.

Russia allows Belarus to import oil for domestic use duty-free, while paying just 35.6 percent of Russia’s crude export tariff for oil that is then refined and sold onward. The Russian premier, Vladimir Putin, insisted Belarus could buy 6 million tons this year for domestic needs without paying duties, leaving 14.5 million tons of crude that Moscow says Minsk should pay at least the full $267 a ton duty on.

However, there was much more to the entire rift. At stake is the political future of Belarus, wedged between Russia and the European Union, and its refineries that the Kremlin, many say, would like to see in the hands of Russian companies. By demanding a hike in customs duties, Moscow could force Belarus to the negotiating table on a host of issues including the sale of Belarussian assets to Russian companies. Belarus has yet to decide whether it will sell a stake in the Naftan oil refinery to Rosneft, a state controlled Russian oil company, or Lukoil, Russia’s second largest oil producer.

In the brewing drama, some also saw Russia using its energy might to bring Belarussian President Alexander Lukashenko to heel after attempts by the former Soviet farm director to leverage dependency on Moscow with overtures toward European powers.

“Russia is playing hardball and bringing Belarus into line,” said Chris Weafer, chief strategist at Uralsib Capital, a Moscow investment bank. “Lukashenko doesn’t really have any options — he has nowhere to go except Russia and the Kremlin knows it.” “Russia is playing oil politics again and is making the market nervous,” said energy economist James Williams, president of WTRG Economics. “The story isn’t necessarily over yet,” said Phil Flynn, senior market analyst at PFG Best. “This is an ongoing concern and it raises a larger issue of energy security in Europe overall.”

Yet, despite the surging markets, market fundamentals remain weak.

Most analysts, for obvious reasons, do not see the rally to continue. Fundamentals don’t point to a stretched demand — supply balance in the real sense. Many don’t expect the current rally to be a harbinger for the future of oil. While prices may continue to hike the first couple of weeks on colder temperatures across the nation, Williams said, oil would not hold above $80 a barrel for long and likely drop to between the $70 and $80 range as the economy undergoes a slow recovery.

He added that stability in Iraq could pressure oil prices even further. “Iraq has opened up to foreign oil companies refurbishing its field and getting oil production back up,” Williams said. “If the internal squabbles get under control, Iraq could increase oil production tremendously in a short period of time.”

Peace in Iraq could add up to 1 million extra barrels of crude oil to the market by the end of the year, and some say that it could attain the production levels of 12-13 million bpd over the next five years — indeed if things go as per plan. Besides the 4.5 million bpd of spare capacity within the OPEC would continue to have a soothing impact on the markets — until and unless something truly unforeseen happens.

Energy pundits don’t seem to have been washed away completely — despite the surge. Some at least seem clinging to their original forecast.