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UK liquids production rose by 34 thousand b/d m/m to 1.20 mb/d in January (+90 thousand b/d y/y), the highest since April 2011. Annual production was revised materially higher in 2018, with growth now estimated at 90 thousand b/d (vs 17 thousand b/d last month), driven by additional production from the Western Isles FPSO and the Catcher area development. In 2019, we expect UK liquids production growth to come in at 70 thousand b/d y/y, buoyed by the start-up of the 0.12 mb/d Clair field in November 2018 and a slew of 2019 start-ups totalling 0.1 mb/d of peak capacity. February production should come in higher m/m given that combined loading programmes for Brent and Forties this month are 36 thousand b/d higher m/m at 0.46 mb/d. Loadings are set to rise to 0.47 mb/d in March. North Sea differentials remained strong through most of February before weakening this week. Heavy Chinese buying has supported Forties recently (as China has been moving away from US crudes due to the ongoing trade war with the US as well as personnel changes at Unipec), such purchases are likely to ease in the near term as the country has overbought crude over the last three months. Moreover, Brexit uncertainty is deterring Korean Forties buying—in either a no deal or hard Brexit scenario, the FTA between Europe and Korea would no longer be applicable to Forties cargoes. Together with peak refinery maintenance in Europe and record US crude arrivals, Dated Brent and Forties are likely to remain limp in the near term, weighing on prompt Brent spreads.
UK oil demand rose y/y by 20 thousand b/d to 1.49 mb/d in December, with growth logged across the barrel. Runs were 63 thousand b/d higher m/m in December (+70 thousand b/d y/y), leaving 2018 runs lower y/y by 32 thousand b/d at 1.17 mb/d.