Oil prices soared even higher on Monday after Russia-Ukraine discussions failed to yield any results, and markets worried about restricted supplies, prompting the International Energy Agency to call for a reduction in oil demand.
Crude futures were up more than 3% in Asia trading on Monday morning, with international benchmark Brent crude at $111.46 and US futures at $108.25.
Oil prices have been extremely volatile in recent weeks, surging to new highs in March before plummeting by more than 20% last week to fall below $100. They surged above that level again in the second half of the week.
Two factors are pushing oil prices higher, according to Mizuho Bank, in a note released on Monday: lingering Russia-Ukraine uncertainty and hopes that China’s latest Covid impact will be less severe than expected amid prospects of lessening restrictions. Shenzhen’s main hub largely reopened on Friday, with five districts allowed to resume work and public transit, according to Reuters.
Officials from Ukraine and Russia have met on ad hoc for peace talks, which have so far failed to yield significant concessions. Despite this, Ukrainian President Volodymyr Zelenksyy has requested a new round of negotiations with Russia.
“If these initiatives fail, it will be a third global war,” Zelenskyy said in an interview with CNN’s Fareed Zakaria on Sunday morning.
In a Monday report, ANZ Research analysts Brian Martin and Daniel Hynes said, “The failure of peace talks between Russia and Ukraine saw crude oil prices extend their rebound on Friday.” “However, it failed to erase earlier-week losses, with Brent crude ending the week down more than 4%.”
Meanwhile, markets were concerned about restricted supplies, prompting the International Energy Agency (IEA) to urge for “immediate steps” to curb oil consumption on Friday.
The conflict between Russia and Ukraine has raised concerns about supply interruptions as a result of US sanctions on Russian oil and gas. The United Kingdom and the European Union have also stated that they will phase out Russian fossil fuels. According to Goldman Sachs figures, Russia contributed 11 percent of global oil consumption and 17 percent of global gas consumption in 2021, as well as up to 40% of Western European gas consumption.
Governments from around Europe will meet with US President Joe Biden this week as the EU contemplates imposing an oil embargo on Russia in response to its unjustified invasion of Ukraine.
Oil prices have slipped below previous heights, according to the Commonwealth Bank of Australia, since markets are still mostly pricing oil by “assessing the chances of a diplomatic settlement to the Ukraine conflict.”
In a note, Vivek Dhar, the bank’s director of energy commodities research, wrote, “Physical shortages, linked to existing sanctions on Russia, will eventually play a more prominent role in oil price determination.”
According to the ANZ Research analysts, “the industry’s apparent inability to fill any prospective vacuum has led calls for consumption reduction.”
According to Reuters, OPEC+ missed its targets by more than 1 million barrels per day in its latest report, indicating that certain suppliers are still falling short of their production quotas.
Reduced speed restrictions for automobiles, working from home for up to three days a week, and avoiding air travel for business were among the IEA’s ideas in a 10-point plan to reduce oil demand.
“We estimate that complete implementation of these policies in advanced economies alone may reduce oil consumption by 2.7 million barrels per day in the next four months, compared to current levels,” the IEA said on Friday.