The six year lows come ahead of a key meeting of the market’s major oil producers who are expected to maintain current high production levels despite falling prices in a bid to see off smaller production rivals.
On Tuesday the price of Brent crude slipped below the $45/barrel mark to $44.44/b, and fell further to $42.49/b by Wednesday’s close, it’s lowest level since March 2009, market sources said.
Historic lows in the oil market over recent years have emerged as a strategic threat to utilities with upstream interests by capping the value of European gas, which is still bought using oil-indexed contracts.
British Gas parent company Centrica said in July this year that it would move ahead with a £1.5 billion strategy shift away from capital intensive E&P and centralised generation to focus on growth areas in the downstream area of its business.
Centrica will now focus on maintaining a smaller E&P business of between 40-50mmboe per annum (from current levels around 75mmboe), focused on the North Sea and East Irish Sea, consuming £400-600 million of annual capital expenditure.
A UK energy trader told Utility Week that the market expects Saudi Arabia to push Opec towards holding its production levels amid rising US inventory stocks, which will add further downward pressure to price levels.
Saudi Arabia, the effective leader of the cartel, has said it will only consider curtailing production if non-Opec countries including Russia agree to do the same. The idea has been dismissed by Moscow, according to reports.