Oil price increase more than 3% as peace talks in Ukraine fail and reports claimed that the EU is considering a ban on Russian energy exports

Oil prices have risen sharply following Russia's invasion of Ukraine. Image Credit: CNBC

On Monday, oil prices increased as much as 3.6 % as peace talks between Russia and Ukraine paused once again, and media are reporting that the European Union is proposing a ban on Russian energy exports increased fears over crude supply.

In morning Europe Brent crude prices were up 3.72 % to $111.65 a barrel, while West Texas Intermediate crude futures were up 3.8 % to $108.62 a barrel.

Over the weekend, representatives from Russia and Ukraine had more diplomatic negotiations, but little progress was achieved toward reaching a deal. According to Reuters, the port city of Mariupol has been under siege for four weeks, and Russia has demanded that Ukraine surrender the city. Ukraine's Deputy Prime Minister, Iryna Vereshchuk, has denied the proposal.

The Ukrainian newspaper Ukrainska Pravda reported Vereshchuk as saying, "There can be no possibility of any surrender, laying down of guns." "This has already been communicated to the Russian side."

According to Commerzbank analysts, the shift in tone surrounding the peace talks has had a negative impact on oil prices.

"News from Russia and Ukraine on the peace talks did not seem nearly as promising as it had previously, forcing the market to analyze the situation," they said.

President Biden imposing a ban on Russian oil following the footsteps of USA media sources suggest that the EU may impose a ban on Russian oil shipments, following in the footsteps of the US. Russia is the world's third-largest oil producer and contributes about half of the natural gas consumed in the European Union. Russian crude-oil cargoes have been avoided by commodities traders for weeks, while natural gas flows have continued unabated through pipelines.

According to analysts at IG, "oil prices are on the rise again, on rumors that the EU is planning an embargo on Russian oil exports, ahead of a summit meeting this week that will be attended by President Biden."

China continues to deal with an increasing number of Covid cases, putting millions of people on lockdown once more. Analysts at ING believe that the increasing number of cases is also influencing current oil market price swings.

According to ING analyst Warren Patterson, "the market is struggling to balance the impact of Russian oil's self-sanctioning with the possible demand hit we're witnessing in China owing to the recent Covid outbreak."

Last week's IEA assessment on the possibility for a prolonged oil shortage as a result of the current crisis was also cited by Commerzbank as having a significant impact.

"The International Energy Agency's estimate on Wednesday is also likely to have had an impact: it expects that the market would be missing 3 million barrels of crude oil and oil products per day from Russia starting in April," the note stated.

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