UK liquids production rose m/m by 60 thousand b/d to 0.96 mb/d in September, higher y/y by 13 thousand b/d. Output increased as rising production at newer fields—particularly Quad 204 and Catcher—likely offset the impact of maintenance at the 0.14 mb/d Buzzard field, which was offline for the first half of the month. Other fields that underwent turnarounds in the month included Pierce, Alma, Galia, Scolty/Crathes and Kraken. Meanwhile, the restart of the 10 thousand b/d Erskine field—halted in January because of a pipeline blockage—has been delayed from its late September target due to the formation of gas hydrates. Turnarounds took Forties exports lower m/m by 20 thousand b/d to just 0.22 mb/d in September (-33 thousand b/d y/y), according to Kpler cargo-tracking data, before picking up to 0.28 mb/d in October. Overall in 2018, we expect UK output to rise y/y, by around 40 thousand b/d. Meanwhile, soaring freight rates have made US and North Sea arbs to Asia marginal at best. US export arbs to Europe are open, however. With a barrage of US exports likely to land in Europe in December, Brent spreads have collapsed, especially amid weak Urals and low NW European refinery runs.
UK oil demand fell y/y by 10 thousand b/d to 1.47 mb/d in August, with small declines across most of the barrel. Increased uncertainty regarding Brexit presents a downside risk to UK oil demand next year, with economic indicators already softening. UK manufacturing orders fell in Q3 18 at their fastest pace in three years, with a net 6% of surveyed companies saying orders fell during the quarter. August refinery runs climbed m/m by 80 thousand b/d to 1.27 mb/d, higher y/y by 3 thousand b/d, buoyed by no planned maintenance during the month.