Brent crude price rebounds to hit two month highs

The price of Brent crude has rebounded from five year lows to its reach its highest level in two months, with expectations of further gains over the coming months.

The price of Brent crude fell below the $50 per barrel mark in January this year after a 60 per cent decline from last summer’s levels of around $110/b after the world’s major oil producers agreed not to cut production despite lower global demand.

Lower oil prices weighed down the price of gas and power across Europe, sparking renewed calls for the UK’s utilities to slash household energy tariffs.

But as expensive oil projects start to cut back on uneconomic production the global glut is beginning to ease, allowing Brent to pare some of its recent losses and offering greater support to gas market prices.

“People fear that a supply curtailment sufficient to really tighten the market is underway,” a UK-based trader told Utility Week.

“There was a lot written about building US inventories, and when those number came out to the low side of estimates last Wednesday [11 February] the market rallied hard,” he added.

Analysts have predicted a return of oil prices to around $70/b by the second half of the year, but the trader cautioned that increased volatility in the market price is expected in the near-term.

“There’s an ongoing oversupply of considerable size so I think a continued sustained bull move higher to $70/b is premature,” he said.

At the same time a decision from the Dutch government to limit the amount of gas produced from its Gronengin gas field in the first half of the year caused gas prices across Europe to move higher on concern over tighter supply.

The Dutch government said the cap would be imposed following continued public concern over earth tremors in the area. UK prices for gas and power were both supported by the news, market sources said.