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12 April 2024

Oil output should be raised: G7 draft

By Agencies

Finance leaders from the Group of Seven industrialised countries called on world oil exporters to step up production, according to a draft copy of a communique obtained by Reuters ahead of its release later on Saturday.


The draft did not contain any proposed wording on foreign exchange rates, which G7 finance officials are discussing in their meetings.


"Elevated oil prices largely reflect rising world demand, but other elements such as geopolitical concerns also play (a) role," the draft communique read.


"We encourage oil-producing countries to raise production, and reiterate the need to enhance refinery capacity and improve energy efficiency."


As reported by Reuters earlier, the draft statement also acknowledged a "more challenging and uncertain" global economic outlook than when the G7 finance ministers last met in October.


The G7 in its October statement made no reference to oil production and previously had only spoken of the need to increase refinery capacity and energy efficiency.


Since then, oil prices briefly topped $100 (Dh365) per barrel last month, pushing global inflation uncomfortably high and complicating matters for central bankers trying to prop up economic growth without stoking further price pressure.


Oil has since retreated to around $90 (Dh328.5) a barrel on concerns a slowing economy would dent demand, although supply disruptions and a forecast US cold snap saw prices vault 4 per cent on Friday to $91.77 (Dh335) a barrel.


Finance ministers are keen to show a united front in the face of a weakening global economy acknowledged that growth was likely to slow, and risks were skewed to the downside.


"We will continue to watch developments closely and take appropriate actions, individually and collectively, in order to secure stability and growth in our economies," the communique read.


The finance leaders called on financial firms to promptly disclose losses they may have incurred and reinforce their capital base.


While banks have announced more than $100 billion in writedowns tied primarily to the US subprime mortgage mess, more is likely to come, particularly from European banks. Many have been slower than their American counterparts to fully recognise and report losses.


The communique also stressed the need for unified action to address global climate change following December's climate talks in Bali, Indonesia, where officials agreed to two years of negotiations to reach a deal to succeed the Kyoto Protocol.


"We will seek to enhance the critical roles played by international financial institutions and the private sector in reducing greenhouse gas emissions. Market-based policies, which could include taxes and emission trading, will become increasingly important in combating climate change."


An eagerly awaited section on foreign exchange issues remained blank as finance leaders wrangled over the wording. A G7 source told Reuters on Saturday that the wording in the communique would be roughly in line with previous comments that put pressure on China to allow its yuan currency to appreciate more quickly.  (Reuters)