PREMIER Oil has finally started production from a giant field it developed West of Shetland where the company has faced delays it blamed on low productivity and bad weather.

The Solan field came onstream on Tuesday around 18 months later than originally hoped.

The start up means London-based Premier will be able to capitalise on the recent rally in oil prices, which some may hope could herald the start of a recovery in the North Sea.

The industry has been hit hard by the plunge in the crude price from $115 per barrel in June 2014, caused by growth in supplies running well ahead of muted demand.

Brent crude traded at around $44 yesterday afternoon, compared with $27 in January. The price has risen 10 per cent plus in the last week amid signs producers may act to try to support prices.

Leading producing nations including Saudi Arabia, Iran and Russia will meet this weekend in Qatar to discuss a possible deal to freeze production.

Any such deal could mark a turning point after a long period during which countries such as Saudi Arabia have kept the taps running despite the sharp fall in prices in order to maintain market share.

However Tom Pugh at Capital Economics said the recent price increase assumed a deal would be agreed in Doha.

“The main point is there has been little change in the fundamentals but prices are up over 10 per cent on last week,” he noted.

Brent crude fell around 30 cents per barrel yesterday, after rising three days running.

Analysts at Bank of America Merrill Lynch highlighted the threat that politics could trump economics at the Qatar meeting. They noted tensions between Saudi Arabia and Iran, which wants to export more oil to capitalise on the lifting of sanctions on the country.

“Should Saudi announce an additional output expansion in response to Iran's return to market, Brent prices could retrace to the $30-35/bbl range,” said the bank.

Capital Economics and Bank of America Merrill Lynch expect prices to increase above $50/bbl next year. Cuts in spending on new fields should help bring supply and demand back into balance.

However Mr Pugh said the recent price increase could encourage firms to maintain production from fields they may otherwise shut in. This could mean prices stay lower for longer.

US shale producers could bring some assets back onstream keeping a lid on prices.

This may make it unlikely Brent will return to $100/bbl unless demand increases significantly.

Premier may be confident about making money from Solan at current prices.

Announcing annual results in February, Premier said it had reduced underlying production costs to $16 per barrel oil equivalent in 2015 from $18.5/boe the preceding year.

It expects production from Solan to ramp up to up to 25,000 barrels daily in the second half of 2016.

But the company has incurred hefty losses to date on Solan.

Premier wrote $998m off the value of its North Sea portfolio in 2015. The charge mainly related to Solan, originally due onstream in the final quarter of 2014.

The company said the impairment reflected increased costs on Solan and the impact of the sharp fall in oil prices on the UK portfolio.

Chief executive Tony Durrant said Solan has been a challenging project for Premier with the commissioning of the production platform taking longer than planned “largely due to significantly worse than anticipated weather conditions”.

In February 2015 Premier said the commissioning of the Solan production facilities had taken longer than anticipated due to poor weather conditions and low productivity over the winter period.

Premier cut the book value of a group of UK fields including Solan by $730m in 2014.