New blow for North Sea oil industry as nations fail to agree to cut output

Analysts predict that oil prices could drop to between $35 and £40 a barrel for the rest of the year.

Talks broke break down after Iran continued to step up output despite Saudi Arabia agreeing to cut production.

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Industry body Oil and Gas UK has estimated that around 20 per cent of UK production is uneconomic at a $50-per-barrel oil price.

Low oil prices have previously led to warnings about jobs and tax revenues from North Sea oil and gas companies already dealing with rising costs and have led to widespread cuts.

One RMT union chief feared that the impasse would lead to further cuts in the North Sea.

But the drop in the price of crude also means consumers can enjoy cheaper petrol in the short term, as falling oil prices keep a lid on the cost of filling up at the pumps, according to analysts.

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The fallout of the crunch meeting in Doha comes after figures from the Office for National Statistics showed the average price of petrol rose by 0.9% between February and March to hit 102.3p per litre.

The oil price has fallen close to 70% since its peak in the summer of 2014.

The meeting in Qatar was attended by most members of oil producers' group Opec, including Saudi Arabia, but not Iran.

Saudi Arabia, the world's biggest exporter, had been prepared to freeze output if all Opec members had agreed.

But Iran is continuing to increase output following the lifting of sanctions against it.

"As we're not going to sign anything, and as we're not part of the decision to freeze output, we ultimately decided it was not necessary to send a representative," the Iranian government said.

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Jake Molloy of the RMT, which represents UK oil workers, said it was "devastating news" and that it could lead to the demise of "a number of operators", who may move to further North Sea decommissioning.

Industry analysts Douglas-Westwood last month estimated nearly 150 platforms in the UK North Sea are expected to be scrapped over the next ten years, taking into account falls in the price of oil.

Of all the decommissioning over the next 25 years, more than half is likely to take place between 2019 and 2026, they said.

Russ Mould, investment director at AJ Bell that while falling oil prices means cheaper petrol, which should put more cash in consumers' pockets, cash it will hit North Sea operators.

"The failure of the Doha talks to produce an output freeze and support the oil price is a potential blow to North Sea producers, as it pressures their revenues, ability to generate cash and in some cases potentially their ability to service interest payments on their debts. This could also have a trickle down effect upon the oil equipment and services companies, as oil firms may continue to restrain, or cut, capital expenditure and investment for longer than originally planned," he said.

Oil services firm Aker confirmed 280 jobs are at risk in Aberdeen and London in the coming months with the Norwegian company describing it as a "tough but necessary" step to help the firm "stay competitive".

Neil Greig of the Institute of Advanced Motorists said that the drops in oil price continued to be a positive for motorists.

"It's excellent news for drivers that as the May and summer holiday seasons approach we can expect fuel prices to stay relatively low. This has a positive impact on everyone as transport costs for everything we buy should continue to be stable.

"The good times will end at some point however, and drivers can still make the biggest savings by adopting a smooth eco-driving style and buying the most economical car that fits their needs."

The average price of petrol rose by 3p a litre when oil jumped above $40 a barrel in March.

RAC fuel spokesman Simon Williams added: "Motorists should be relieved that the Doha oil producer talks broke down without a production freeze agreement as this means fuel prices at the pumps should not rise too much further.

"Even if a production freeze of some sort had been agreed, we would have been very surprised if it had meant the price of oil going back above $60 a barrel. To put things in perspective, four years ago when the average price of petrol was 142p and diesel was 148p, a barrel of oil cost $120 a barrel, so fortunately we are a long way from seeing those bad times again."

Russ Mould, investment director at AJ Bell, said : "In theory, falling oil prices means cheaper petrol, which should put more cash in consumers' pockets, cash which could be spent at the food and general retailers."