Oil stages first major pullback since Russia's invasion

Oil prices staged a dramatic selloff on Wednesday night, down -13% to US$112 a barrel. This marks the first significant pullback in oil since the Russian invasion of Ukraine. 

The S&P/ASX 200 Energy sector has followed suit, down -2.5% at noon. Notable losers include: 

• Woodside Petroleum (ASX: WPL) -4.7%

• Santos (ASX: STO) -2.4%

• Beach Energy (ASX: BPT) -5.9% 

Oil drivers

Oil prices fell after an OPEC member from the United Arab Emirates said they supported increasing oil output in response to Russian supply disruptions, according to Reuters.

"We favor production increases and will be encouraging OPEC to consider higher production level," said Ambassador Yousuf Al Otaiba.

In addition, the EU pushed back bans against Russian oil due to the region's heavy reliance on imports. This follows the US and UK decisions to ban and phase out Russian oil imports.

The EU is heavily reliant on Russian imports, so a ban would likely drive prices even higher.

The International Energy Agency (IEA) has also chipped away at oil sentiment, looking to draw up a "10-point action plan" to reduce oil consumption.

Last week, the IEA released 60m barrels of strategic oil reserves to ease surging energy prices. The IEA has hinted at additional relief if necessary.

Where to from here? 

"With more sanctions to come and pressure increasing on Germany to intensify the pressure on Russia’s economy, we could see prices rising again before too long, in the absence of a ceasefire," said Oanda senior market analyst, Craig Erlam.

"Further selling could quickly attract interest given the recent moves we’ve seen and further escalation, or even Russia pouring cold water on the idea of a deal, could see it rally strongly once more."

JPMorgan summarises where oil prices might go, subject to the outcome of the US/Iran Nuclear Deal and strategic oil reserve releases.