Crude prices slipped below $96 a barrel Wednesday after finance ministers from the world's leading industrialized economies called on oil producers to increase output and said were ready to ask the International Energy Agency to release strategic reserves.
By early afternoon in Europe, benchmark oil for October delivery was down 74 cents to $95.59 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 86 cents to finish at $96.33 per barrel on the Nymex on Tuesday.
In London, Brent crude fell 94 cents to $111.64 in the ICE Futures exchange.
A statement released by the Group of Seven finance ministers late Tuesday said the ministers were concerned about the impact of rising oil prices on the global economy and were prepared to act.
"We encourage oil-producing countries to increase their output to meet demand," the statement said. "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 Obama administration has also said it would consider releasing oil from the country's emergency reserves to keep fuel prices in check.
Analyst Olivier Jakob of Switzerland's Petromatrix linked the Group of Seven's statement to the effects of U.S.-led sanctions on Iran's oil exports meant to limit the Islamic Republic's nuclear program.
"The G7 communique is an implicit recognition of the total failure of Saudi Arabia to control supply and prices while the West imposes sanctions on Iran," Jakob said. "For lack of production spare capacity or for lack of political will, Saudi Arabia has simply not performed on its commitment to the G-20 and as a result the politicians in the West are starting to panic as prices at the pump reach record highs."
"Given that Saudi Arabia is not responding, if the U.S. does not want the sanctions against Iran to break down then it is left with no other option than to release" strategic reserves, Jakob said.
Benchmark U.S. oil has risen about 22 percent since late June. Brent crude, which is used to price international blends that many U.S. refineries use to make gasoline, is up about 23 percent in the same period.
Meanwhile, Hurricane Isaac, a Category 1 storm, made landfall Tuesday night but appeared to be weakening, easing fears about how much — and for how long — the storm's powerful winds and driving rains would affect oil production and refinery operations in the Gulf of Mexico region.
"Oil prices are slightly down this morning because it is expected that oil production in the Gulf of Mexico will quickly return to normal," said analysts at Commerzbank in Frankfurt.
In other Nymex energy trading, heating oil was down 1.99 cents to $3.1086 per gallon and wholesale gasoline declined 3.99 cent to $2.8934 a gallon. Natural gas fell 2.6 cents to $2.588 per 1,000 cubic feet.
Pamela Sampson in Bangkok contributed to this report.