Oil exporters made the surprise move to cut production by over a million barrels a day on Sunday, prompting crude prices to soar over six percent as the week began.
OPEC+ states, which account for 40% of the world’s oil production, said the move was “a precautionary measure aimed at supporting the stability of the oil market".
Crude oil subsequently rose 6.2% to US$80.6 per barrel on Monday, before falling slightly to US$79.3, according to Trading Economics.
The UN National Security Council responded that cuts, which aim to artificially lift prices, were not “advisable at this moment, given market uncertainty”.
CMC Markets analyst Michael Hewson said the cuts by the likes of Saudi Arabia and Iraq could lead to higher inflation.
“It now appears that OPEC+ would prefer prices to be closer to US$90 a barrel than US$80, which might be ok for them, but could make inflationary pressures for everyone else much harder to subdue,” he said.
“The reality is that inflation is unlikely to be receding any time soon,” Hewson added.
"Next month could well see the economic boost offered by the recent fall in energy prices start to reverse if [Monday] morning’s surge in oil prices gains traction”.
Crude still sits below pre-Ukraine war prices, having receded from a peak of US$119.65 in March 2022, to a low of US$66.93 last month.