Oil prices jumped even higher on Monday after Russia-Ukraine talks appeared to yield no sign of progress, and markets continued to fret over tight supply — sparking a call by the International Energy Agency to reduce oil demand.

 

Crude futures were up more than 3% on Monday morning during Asia trading — international benchmark Brent crude was at  $111.46, and U.S. futures at $108.25.

 

In a note on Monday, Mizuho Bank said two factors were pushing oil prices higher: lingering Russia-Ukraine uncertainty as well as hopes that China’s latest Covid impact could be less dire than anticipated amid expectations of easing restrictions. The key hub of Shenzhen partially opened up Friday, as five districts were allowed to restart work and resume public transportation, Reuters reported.

 

Ukrainian and Russian officials have met intermittently for peace talks, which have so far failed to progress to key concessions. Still, Ukrainian President Volodymyr Zelenksyy has called for another round of talks with Moscow.

 

“If these attempts fail, that would mean that this is a third world war,” Zelenskyy told CNN’s Fareed Zakaria in an interview that aired Sunday morning.

 

“The breakdown of peace talks between Russia and Ukraine saw crude oil prices extend their rebound on Friday,” ANZ Research analysts Brian Martin and Daniel Hynes wrote in a Monday note. “However, it failed to offset the losses earlier in the week, with Brent crude ending down more than 4%.”

 

Meanwhile, tight supply continued to worry markets, sparking a call by the International Energy Agency (IEA) on Friday for “emergency measures” to reduce oil usage.

 

The Russia-Ukraine war has led to worries over supply disruptions as a result of U.S. sanctions on Russian oil and gas. The U.K. and European Union also said they would phase out Russian fossil fuels. Russia supplied 11% of global oil consumption and 17% of global gas consumption in 2021, and as much as 40% of Western European gas consumption in the same period, according to statistics from Goldman Sachs.

 

European Union governments are set to meet U.S. President Joe Biden this week as the EU considers an oil embargo on Russia over the unprovoked invasion of Ukraine.

 

The Commonwealth Bank of Australia warned Monday that oil prices have fallen below recent peaks because markets are still largely pricing oil by “assessing the likelihood of a diplomatic solution to the Ukraine conflict.”

 

“Physical shortages, linked to current sanctions on Russia, though will eventually play a more dominant role in oil price determination,” said Vivek Dhar, the bank’s director of energy commodities research, in a note.

 

“The industry’s apparent inability to fill any potential gap has seen calls for consumption to be reduced,” the ANZ Research analysts said.

 

OPEC+ in its latest report showed some producers are still falling short of their supply quotas, with Reuters citing sources who said that the alliance missed its targets by more than 1 million barrels a day.

 

In a 10-point plan, the IEA’s suggestions to reduce oil demand included reducing speed limits for vehicles, working from home for up to three days a week, and avoiding air travel for business.

 

“We estimate that the full implementation of these measures in advanced economies alone can cut oil demand by 2.7 million barrels a day within the next four months, relative to current levels,” the IEA said Friday.