Oil prices plunge to 12 year lows

The 5 per cent losses to lows of $34.21/b follow escalating tensions between Saudi Arabi and Iran, which market players fear may ruin the chances of a production cut deal between the Opec nations which would help support prices despite the global oil glut.

Also on Wednesday US inventory data showed an increase in petroleum products which could signal a further reduction in demand.

For UK utilities, depressed crude prices could threaten what remains of their upstream oil and gas assets, hitting profits and deepening the UK’s already rising reliance on imported gas.

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 has already moved 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.