By Giulia Petroni

OPEC+, the world's largest group of oil producers, is expected to approve another super-sized output hike on Sunday in a move that would fast-track plans to unwind production cuts a full year ahead of the original schedule.

Key members of the alliance have already agreed to a 411,000-barrel-a-day increase--three times the initially planned volume--for May, June and July. Another boost in August would mark the fourth consecutive month of large increases, leaving the market well-supplied through year-end.

If approved, the hike would push total supply increases since April to nearly 1.8 million barrels a day. "Given its strategy shift, we believe the group will continue with these large increases," ING analysts said. "This would see the full 2.2 million barrels a day of supply brought back online by the end of the third quarter, 12 months ahead of the original schedule."

The key eight OPEC+ members meeting virtually on Sunday are Saudi Arabia, Russia, Iraq, the U.A.E., Kuwait, Kazakhstan, Algeria, and Oman. Riyadh, which has historically kept output low to support prices, will take the lion's share of the increases.

The cartel and its allies, which pump about half of the world's oil, have made a radical change in policy this year despite weakening global demand prospects and abundant supply. The move underscores Saudi Arabia's efforts to reclaim market share lost to rivals and rein in members like Kazakhstan, which have repeatedly exceeded their production targets.

Countries that have produced above quotas are still required to make compensation cuts to offset overproduction. In May, for instance, OPEC+'s net production increase accounted for roughly half of the 411,000-barrel-a-day headline figure, according to data provider Kpler.

The acceleration of this unwinding process has also been strategically timed for the summer months, when higher domestic demand among member states can absorb much of the extra supply.

However, market participants caution that if OPEC+ continues to unwind cuts under current conditions--where supply risks in the Middle East have been largely neutralized--oil prices could face further pressure. When OPEC+ announced it would triple its output hikes for May, prices fell to a four-year low below $60 a barrel.

In the U.S., seasonal demand is robust and oil inventories continue to tighten, but low prices are squeezing shale producers--who typically need oil closer to $70 a barrel to profitably drill. At the same time, however, cooling prices could help ease inflation pressures and influence upcoming Federal Reserve decisions, favoring looser monetary policy.

Brent crude is trading above $67 per barrel, while West Texas Intermediate is around $65. Futures briefly surged to a five-month high following the U.S. attack on Iran's nuclear facilities, only to retreat as the Israel-Iran ceasefire alleviated tensions and supply risks.

With tariffs and geopolitical uncertainties adding volatility, the market's focus has now shifted firmly to the supply-demand balance.

"After a volatile second quarter, marked by geopolitical shocks, tariff fears, and a short-lived rally, oil has lost nearly 10%, and momentum remains weak," said Soojin Kim, analyst at MUFG. "With demand outlook uncertain, especially in China and other major economies, and U.S. tariff hikes set to resume on July 9, market focus has returned to supply-demand fundamentals."

Write to Giulia Petroni at giulia.petroni@wsj.com

(END) Dow Jones Newswires

July 01, 2025 08:07 ET (12:07 GMT)

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