Oil falls on supply; G-7 wants more production

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Oil falls on supply; G-7 wants more production

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Oil prices eased after a call by the Group of Seven nations for oil producers to increase output.

30 August,2012 03:21 am

Oil fell Wednesday as U.S. supplies rose for the first time in a month and finance ministers from leading industrialized nations pleaded with top producers to boost crude production to help lower crude prices and help the global economy.Traders also awaited assessments of any damage from Hurricane Isaac as it passed over oil facilities in the Gulf of Mexico. About 93 percent of Gulf production was shut ahead of the storm.Benchmark oil fell $1.05 to $95.28 per barrel in afternoon trading in New York. Brent crude, which is used to price international varieties of oil, fell 12 cents to $112.46 per barrel in London.The government reported that crude inventories increased 3.8 million barrels to 364.5 million barrels last week. Analysts had expected a drop of 2 million barrels, according to Platts, the energy information arm of McGraw-Hill.Separately, finance ministers from the Group of Seven countries said they are concerned that higher oil prices pose a risk to the sluggish global economy. They appealed to oil-producing countries to increase output while also suggesting they could ask the International Energy Agency to release oil from strategic reserves. The G-7 includes the United States, Japan, Germany, France, Britain, Italy and Canada. The IEA represents more than two dozen oil-importing nations.Maria van der Hoeven, who heads the IEA, told Bloomberg News there is no need for a release from stockpiles. The market is sufficiently well supplied, she said in an interview in Stavanger, Norway, adding that any action would require a serious disruption of supply.The price of oil has risen by more than 20 percent since late June. But both benchmark U.S. oil and Brent crude remain more than 10 percent below their highs for the year.Meanwhile, Hurricane Isaac pushed inland, but it could be days before the extent of any damage to oil production facilities in the Gulf and coastal refineries is known.About 1.3 million barrels per day of oil production was shut down because of the Gulf closures. Some of that impact has been softened by changes in the market and the facilities themselves over the past few years.Technological advances have led to a jump in oil production from onshore operations since hurricanes last hit the Gulf in 2008. And rigs have been constructed to be more durable and well-grounded after previous hurricanes.The storm wasnt strong enough to probably do any serious infrastructure damage, said Kyle Cooper, managing director of research at Cyprus Energy LP.Offshore oil production could begin to resume within two to three days if there is no damage, he said.