UK oil data – Oct 2018

Published at 10:46 29 Nov 2018 by . Last edited 11:18 22 Aug 2019.

UK liquids production rose m/m by 0.13 mb/d to 1.02 mb/d in October, but was 10 thousand b/d lower y/y. The m/m pickup in output was due to less maintenance at UK fields, with major fields including the 0.14 mb/d Buzzard returning from works. But production will dip again in November as Buzzard shut down on 19 November after the discovery of pipe corrosion and is not expected to return until mid-December. It is currently unclear whether the corrosion was found at the platform itself or on a subsea pipeline, but, if the latter, the outage could last longer than expected, which would provide some support for Brent spreads. Buzzard’s shutdown, in addition to the unplanned closure of the Forties-linked Elgin Franklin field, has led to several deferrals and cancellations (three for now, but likely to rise) of December Forties cargoes. Forties exports already fell m/m by 60 thousand b/d to 0.25 mb/d in November to date, according to Kpler data, while December exports are set to be even lower. A Brent cargo was also dropped from the December programme. In a positive for UK production, the 0.12 mb/d Clair Ridge field was brought onstream in November and will boost UK production in 2019, when we expect output will be higher y/y by 0.1-0.2 mb/d, barring any persistent corrosion problems at Buzzard.

UK oil demand rose y/y by 37 thousand b/d to 1.56 mb/d in September, with the growth led by diesel (+24 thousand b/d) and LPG (+15 thousand b/d). Increased uncertainty regarding Brexit presents a downside risk to UK oil demand next year, with economic indicators already softening. For example, UK business investment fell q/q by 1.2% in Q3 18, the third consecutive contraction. A UK government forecast suggests that Brexit, in the form of the current proposed deal, would result in a 3.9% reduction in GDP after 15 years, compared with staying in the EU.   

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