Talk of $200 oil casts shadow over G8 summit

TOYAKO, Japan (Reuters) - Italy on Monday proposed increasing margin requirements on futures markets to deter speculative buying of oil, which Prime Minister Silvio Berlusconi said could reach $200 a barrel.

Oil retreated to around $143 a barrel on Monday, taking a pause from a record-breaking rally that lifted prices to a record $145.85 last week, up almost 50 percent this year.

Most analysts attribute the spike to supply shortages, increased demand and a weaker dollar, the currency in which most oil is traded, but Berlusconi said speculative bets on the futures market were also a factor.

"There are fears oil prices could increase further. Some people fear they could reach $200," Berlusconi told reporters on the sidelines of the annual summit of the Group of Eight rich nations on the northern Japanese island of Hokkaido.

An analyst with investment bank Goldman Sachs, Arjun Murti, raised eyebrows in May by forecasting that oil could reach $200 a barrel within two years.

Berlusconi said Italy favored a rise in margin requirements to curb speculative buying.

"This is our proposal and we have started talking about it in bilateral meetings. Stock exchanges should increase margin deposits on the futures market, which now stand at 5 percent. Someone said they should be increased to 50 percent but it's still small talk at this stage," Berlusconi said.

The relentless rise in oil prices cast a long shadow over the first day of the G8 summit, which brings together the United States, Japan, Germany, France, Britain, Canada and Russia as well as Italy.

"We have to look at different ways to fight high oil prices," German Chancellor Angela Merkel told a news conference.

"One question is what to do to act against speculation. The second question is, how do we arrive at a better forecast of oil demand developments and also how do we come up with a better forecast of oil production?"

The presidents of oil producers Nigeria and Algeria were among seven African leaders who joined the G8 for talks on Monday, and a senior Canadian official said they acknowledged the need to take account of the fallout from sky-high prices.

"The message was that they realize that there was a responsibility by oil-producing countries, including themselves, to consider the impacts of high oil prices on countries and the impact on development," the official told reporters.

Merkel said there was also a need to engage emerging economies that are consuming more and more oil.

China alone accounted for almost half of last year's increase in global demand.

"We will have to put the issue again on the agenda when we meet China, India, Mexico, Brazil and South Africa," Merkel said. That meeting will be on Wednesday, the last day of the summit.

Berlusconi's and Merkel's comments reflect growing pressures on politicians to do something about oil.

A British parliamentary committee will hold a hearing on regulation of the oil markets this month, while in the United States a raft of bills is before the House of Representatives trying to limit speculation in oil futures markets.

Dutch bank ING said on Monday that it was not hard to imagine oil at $200 a barrel before the end of the year -- a level it said would crush demand and could trigger a price plunge in 2009.

"With the margin of spare capacity evidently wafer-thin, whether it is the surprising resilience of demand or some kind of supply disruption, ranging from a worse-than-usual hurricane season in the Gulf of Mexico or a potential Israeli attack on Iran, $200 is a target that no longer seems fanciful," ING economists said in a report.

(Reporting by Paolo Biondi, Gernot Heller and David Ljunggren; Writing by Alan Wheatley; Editing by Rodney Joyce)