UK liquids production fell m/m by 56 thousand b/d to 0.96 mb/d in August but remained higher y/y by 77 thousand b/d due to a low base as maintenance was heavier in August 2017. Production in the year to August was higher y/y by 19 thousand b/d. The August m/m decline came as several fields underwent works, including Cormorant Alpha, Dons, Thistle, Elgin Franklin, ETAP and Pierce, in addition to short works on the Graben export line. Production in September was hit by maintenance at the 0.14 mb/d Buzzard field, which took output offline for the first half of the month—longer than anticipated—after inclement weather delayed its return. Buzzard’s maintenance led to Ineos revising down its forecast of September Forties output by 8.5% to 0.39 mb/d, from 0.43 mb/d previously. Forties output was likely even lower than this, as estimates were made before the weather-related delays. Maintenance at Pierce continues into September, while other fields to undergo turnarounds include Alma, Galia, Scolty/Crathes and Kraken. With sour crude markets tightening rapidly amid sharply lower Iranian exports, sweet-sour switching is underway globally, boosting North Sea differentials and Dated Brent. We expect Brent spreads to continue strengthening even with possible run cuts in parts of Europe as refining margins have weakened materially. Given the lack of crude availability, run cuts are the only way to balance this market.
UK oil demand fell y/y by 20 thousand b/d to 1.44 mb/d in July, led by 11 thousand b/d and 5 thousand b/d y/y contractions in diesel and gasoline demand, respectively. July refinery runs climbed m/m by 32 thousand b/d to 1.19 mb/d, higher y/y by 25 thousand b/d and the first annual growth since September 2017, buoyed by no planned maintenance during the month.