Who would have thought a little over a year ago on that doomed day in April when WTI went into negative territory, as the pandemic shut down economies and travel alike, that Brent would surpass $75 per barrel? It did so last week.

This brings us to the discussion between the bulls and the bears of the oil markets as well as the experts watching inflation.

The market is currently undersupplied by over 2 million barrels per day (bpd). Still OPEC+ (an alliance of OPEC nations and 10 friendly nations) will have to triangulate between supplying the world with crude, given increased demand as economies restart and travel resumes, and the threat posed by the new and highly virulent delta variant of COVID-19. 

While life seems to return to normality in some parts of the US and Europe, the UK and California seem to be particularly hard hit by the new variant. Sydney had to impose new restrictions and various Asian nations are cautious to say the least. Who could not have heard about the supply chain dilemma induced by restrictions in the Pearl River Delta, brought on by outbreaks of COVID-19? Gone are the days when East of Suez was given the all clear in terms of COVID-19 and West of Suez was the problem.

This brings us to this week’s OPEC+ meeting, where ministers will have to weigh up against a crude market which is undersupplied, the effects of higher oil prices on inflation versus the necessary caution necessitated by how the delta variant will affect the global economy.

Taking their cue from the UK, many European countries expect the delta variant to become the dominant strain of COVID-19 in the immediate future. This is bad news for European economies ending lockdown scenarios, as well as for the European holiday season.

On July 1 OPEC+ ministers will have to straddle the divide between an oil price that rallied ahead and clear signs of recovery and the dangers looming from new and highly infectious variants. These are not easy decisions, especially as the price of oil affects inflation statistics globally.

Expect Russia to advocate for a loosening of restrictions beyond the 550,000 bpd, which are foreseen according to previous agreements among OPEC+. Others may err on the side of caution given how quickly and devastatingly the delta variant is spreading — putting into question long-harbored plans to reopen economies.

Russia for sure will push ministers at the July 1 meeting to pump more. This being said, it is Moscow and St. Petersburg witnessing some of the most recent lockdowns. Then there are also the uncertainties emerging from whether or not the JCPOA (Joint Comprehensive Plan of Action) with Iran will get renewed, an issue that has been brought to the fore by recent shenanigans in the negotiations as well as US air attacks on Iran-backed militants in the Middle East.

The long and short of it is that geopolitical vagaries will remain and, more importantly, the virus has a mind of its own. Until sufficient parts of the world’s population are vaccinated, OPEC+ will have to straddle the opaque space between keeping markets adequately supplied and caution arising from new threats emerging from the imponderabilities of the virus.

In the medium term, we can expect OPEC+ to up production to meet demand as there is sufficient headroom. However we just may need to give it a little time, looking at the unpredictability of the virus.

But let us not forget that, if it was not for the swift action of OPEC+ shutting in more than 9 million bpd in April 2020, oil markets might never have recovered. One thing is for sure though, the ministers in OPEC+ are aware of their responsibility to global markets in general and oil markets in particular.

• Cornelia Meyer is a Ph.D.-level economist with 30 years of experience in investment banking and industry. She is chairperson and CEO of business consultancy Meyer Resources.

Twitter: @MeyerResources