Oil prices drop after G7 call for more production

Global oil prices eased Wednesday after a call by the Group of Seven nations for oil producers to increase output and the US Federal Reserve released a report showing US economic growth dull but not dire. New York's main contract, West Texas Intermediate crude for October delivery, retreated 84 cents to $95.49 a barrel. In London deals, Brent North Sea crude for October shed four cents to $112.54 a barrel. While much of the energy infrastructure on the US Gulf of Mexico was shut down for Hurricane Isaac, the market saw the storm as having little impact on the supply and demand situation going forward. "Oil prices have... retreated as damage from Isaac appears insignificant, and production is expected to resume quickly," added GFT analyst David Morrison. About 95 percent of Gulf of Mexico production, or 1.31 million barrels a day, had been shut in before Isaac strengthened to a hurricane late on Tuesday. By Wednesday afternoon the storm had passed into the mainland and was downgraded to a tropical storm. "It is now believed that the overall damage will be lower than expected, and largely limited to flooding effects onshore," said PVM Associates analyst Tamas Varga. Markets also reacted minimally to the G7 call, pushed mainly by the United States. Finance ministers said in a statement issued Tuesday that oil producers needed to increase output, saying that higher prices posed "substantial risks" to the global economy. With growth weakening in key economies and tensions over Iran worrying major oil importers, the G7 finance ministers also hinted they were ready to push for the release of strategic oil reserves to prevent a tightening of the market. "We stand ready to call upon the International Energy Agency to take appropriate action to ensure that the market is fully and timely supplied," the statement said. Meanwhile the Federal Reserve released its periodic Beige Book report on regional economies that slightly downgraded the assessment from July's edition. The economy has been growing "gradually" during the past two months "across most regions and sectors" -- taken as a slightly bearish signal by analysts and markets.