France, Britain seek to curb oil market volatility

PARIS (Reuters) - The leaders of France and Britain called on Wednesday for action to reduce oil market volatility and establish a price range for crude oil that would be "compatible with fundamentals."

French President Nicolas Sarkozy and British Prime Minister Gordon Brown issued the call in a joint column in Wednesday's edition of the Wall Street Journal.

"We are convinced that producers and consumers would benefit from more transparency, greater stability and a wider consensus on the fundamentals of the market," they said, according to the French text made available in advance by Sarkozy's office.

The column follows a call from the two on Monday for reduced oil price volatility and comes as leaders from the Group of Eight industrialized nations meet in L'Aquila, Italy where Sarkozy and Brown are expected to press for action.

Both believe that sharp fluctuations in crude oil prices have contributed to the instability of the global economy and could worsen the current crisis.

"A new period of instability today would risk undermining confidence at a time when we are heading toward recovery," they said. "Governments cannot remain inactive."

The column contained few specific proposals but said measures should build on the work of the London Energy Meeting in December, where producer and consumer countries agreed on the need for more stability and transparency in oil markets.

"The group of experts from the International Energy Forum should use this as the basis for defining a joint long term vision of a price range that would be compatible with fundamentals," they said.

They said the expert group which participants at the London meeting agreed to set up should seek ways to reduce volatility and consider how trading on oil markets added to "anarchic" price movements.

The column also urged international market regulators to consider ways to improve market transparency and reduce the kind of speculation that triggered market volatility.

"The world economy needs reliable supplies at prices that are not too high, as that would risk destroying economic growth prospects, nor too low, as that could cause a fall in investment as was the case during the 1990s," they said.

(Writing by James Mackenzie)