Finance ministers of the Group of Seven (G7) most industrialized nations urged oil-producing countries on Tuesday to raise output to ensure the market is well supplied, while warning that the West was ready to tap strategic oil reserves to offset rising prices that could hamper global growth.
“We stand ready to call upon the International Energy Agency [IEA] to take appropriate action to ensure that the market is fully and timely supplied,” the G7 said in a statement. “The current rise in oil prices reflects geopolitical concerns and certain supply disruptions. We encourage oil-producing countries to increase their output to meet demand.”
Oil prices have surged as Western sanctions on Iran led to a loss of about 1 million barrels per day in crude exports from the OPEC member. Prices rose on Tuesday as Hurricane Isaac approached the oil-rich US Gulf coast.
The administration of US President Barack Obama said it was still open to release of oil from the US’ Strategic Petroleum Reserve.
“That option has been on the table for some time and remains on the table, but we have no announcements to make today,” White House spokesman Jay Carney told reporters traveling to Iowa with Obama.
The head of the IEA, which represents 28 oil-consuming countries, voiced her strongest opposition yet to a release of emergency oil supplies.
“Higher prices alone are not the trigger for an IEA collective stock release and at this moment we see that the crude oil market is adequately supplied,” Maria van der Hoeven said earlier on Tuesday at an industry conference in Norway.
Losses of crude exports because of this year’s sanctions on Iran “didn’t come out of the blue,” she said, adding that the US would need to decide whether Hurricane Isaac required a domestic-stock release.
Oil production in the US Gulf of Mexico was down more than 90 percent on Tuesday as Hurricane Isaac headed toward Louisiana as a Category 1 storm.
Energy analysts do not anticipate extensive damage to oil and gas infrastructure if the storm stays in line with current projections. Still, any supply disruptions could heighten pressure for emergency oil supplies to be released.
“We remain vigilant of the risks to the global economy. In this context and mindful of the substantial risks posed by elevated oil prices, we are monitoring the situation in oil markets closely,” the G7 said.
Finance ministers also noted that Saudi Arabia had committed at a G20 meeting of world leaders in Mexico earlier this year to use its spare oil production capacity to ensure adequate supply.
Crude oil prices sank in Asia yesterday after the call by G7 to increase output. New York’s main contract, light sweet crude for October delivery, shed US$0.52 to US$95.81 a barrel and Brent North Sea crude for delivery in the same month slipped US$0.25 to US$112.33.