oil prices skyrocket, IEA calls for cuts in energy consumption

Gas prices in Westchester are above six dollars as pump prices continue to rise on Sunday, March 13, 2022 in Los Angeles, CA, in the Southland.

Jason Armond | Los Angeles Times | Getty Images

Oil prices rose even higher on Monday after Russia-Ukraine talks appeared to show no sign of progress, and markets continued to fret over the tight supply – sparking an International Energy Agency’s call to cut demand for oil. .

Crude futures rose as much as 3% on Monday morning during Asia trading – international benchmark Brent oil stood at $110.81 and US futures at $107.68.

Oil prices have been volatile in recent weeks, soaring to record highs in March before falling more than 20% to below $100 last week. They jumped again in the second half of last week to rise above that level.

In a note on Monday, Mizuho Bank said two factors pushed oil prices up: the ongoing uncertainty between Russia and Ukraine and hopes that China’s latest Covid impact could be less severe than expected amid expectations of easing the economy. limits.

Ukrainian and Russian officials have met intermittently for peace talks, which have so far not resulted in major concessions. Nevertheless, Ukrainian President Volodymyr Zelenksyy has called for a new round of talks with Moscow.

“If these efforts fail, it would mean this is World War III,” Zelenskyy told CNN’s Fareed Zakaria in an interview that aired Sunday morning.

“The failure of the peace talks between Russia and Ukraine saw… Crude oil price extends their recovery on Friday,” ANZ Research analysts Brian Martin and Daniel Hynes wrote in a note on Monday. “However, it failed to offset losses earlier this week, with Brent crude more than 4% fell.”

The industry’s apparent inability to fill any gap has led to calls to cut consumption.

Brian Martin and Daniel Hynes

ANZ investigation

Meanwhile, tight supply continued to worry markets, prompting an International Energy Agency (IEA) call on Friday for “emergency measures” to cut oil consumption.

The war between Russia and Ukraine has raised concerns about supply disruptions due to US sanctions on Russian oil and gas. The UK and the European Union also said they would phase out Russia’s fossil fuels. Russia supplied 11% of global oil consumption and 17% of global gas consumption in 2021, and a whopping 40% of Western European gas consumption in the same period, according to Goldman Sachs statistics.

The Commonwealth Bank of Australia warned on Monday that oil prices have fallen below recent peaks as markets continue to price oil largely by “estimating the likelihood of a diplomatic solution to the conflict in Ukraine”.

“Physical shortages, coupled with the current sanctions against Russia, will eventually play a more dominant role in determining the price of oil,” said Vivek Dhar, director of energy commodities research at the bank.

“The industry’s apparent inability to fill any gap has led to calls for cuts in consumption,” ANZ Research analysts said.

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In a ten-point plan, the IEA’s suggestions to reduce oil demand include lowering vehicle speed limits, working from home to three days a week and avoiding air travel for business.

“We estimate that the full implementation of these measures in advanced economies alone could reduce oil demand by 2.7 million barrels per day over the next four months, compared to current levels,” the IEA said Friday.