G7 Hints At Emergency Oil Release, Calls Oil Producers To Raise Output

Finance ministers from the Group of Seven (G7) nations have warned oil-producing countries that their group was prepared to release their emergency oil reserves into the market, unless the oil producers ensured that the market was well supplied.

“The current rise in oil prices reflects geopolitical concerns and certain supply disruptions,” said the G7 in a joint statement, cited by Reuters.

Finance ministers from the Group of Seven (G7) nations have warned oil-producing countries that their group was prepared to release their emergency oil reserves into the market, unless the oil producers ensured that the market was well supplied.

“The current rise in oil prices reflects geopolitical concerns and certain supply disruptions,” said the G7 in a joint statement, cited by Reuters.

[quote]“We encourage oil-producing countries to increase their output to meet demand…[and] 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,” they added.[/quote]

Since the beginning of this week, oil prices have strengthened as Hurricane Isaac approaches the United States, shutting down oil production in the Gulf of Mexico.

The Western sanctions on Iran, which cut the global oil supply by nearly a million barrels a day, have also seen oil prices being very volatile throughout the year, with U.S. president Barack Obama admitting that he had already considered tapping their emergency oil reserves back in March.

But while the IEA, which represents the major oil consuming nations, last week appeared to have weakened its resistance against releasing the strategic oil reserves, IEA chief Maria van der Hoeven told a separate industry conference in Norway on Tuesday that she still did not see the need for such action.

“The Iranian sanctions didn’t come out of the blue,” told van der Hoeven to her audience. “The market has been adjusting relatively smoothly to lower Iranian supplies of the last nine months.”

[quote]”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,” she added.[/quote]

But analysts still point out that oil prices have risen by 24 percent, since reaching a 2012 low in June.

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“There’s reason to be worried,” told Uri Dadush, director of international economics at the Carnegie Endowment for International Peace in Washington, to Bloomberg.

“It’s not a good time to get another shock,” Dadush said.

And Jan Stuart, head of energy research at Credit Suisse in New York, believes that an emergency release may be imminent given the strong statements by the G-7 finance ministers.

[quote]”A significant group of industrialized countries now appears to be ready to make reserves available – they know that when you make statements at this level, you also need to be ready to follow through,” he said.[/quote]