UK liquids output rose m/m by 67 thousand b/d to 1.01 mb/d in July, higher y/y by 15 thousand b/d. Maintenance was lower m/m in July, although work likely began at the 16 thousand b/d Pierce field, which was scheduled for a 10-week turnaround in Q3 18. Other notable outages included strikes at Total’s UK platforms, taking 50 thousand b/d offline for around four days. In line with heavy maintenance, scheduled loadings of Forties crude dropped m/m by 0.1 mb/d to 0.25 mb/d in August—the lowest since December 2017—before recovering to 0.36 mb/d in September. Despite rising decline rates, UK oil output was still higher y/y by 15 thousand b/d in the year to July, thanks to newer field ramp ups. The Catcher field has performed strongly since coming online in late 2017, exceeding capacity by 10 thousand b/d to produce at 70 thousand b/d as of August. Operator Premier Oil sees considerable upside from the Catcher Area and has begun discussions with BW about extending plateau through infill drilling and tie-backs. With sour crude markets tightening rapidly amid sharply lower Iranian exports, sweet-sour switching is underway, boosting North Sea differentials. The Ekofisk overhang is yet to clear, but Forties demand has risen in Asia (Korea & China) and locally amid stellar refinery margins. We expect Brent spreads to strengthen after the October contract expires, as we see lower US exports over August and September and strong refinery demand after plants return from November works.
UK oil demand rose y/y by 28 thousand b/d to 1.54 mb/d in June, gaining across most of the barrel. June refinery runs climbed by 74 thousand b/d m/m to 1.16 mb/d as maintenance eased, but runs were still 80 thousand b/d lower y/y as June 2017 works were sparse.