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UK liquids production fell by 0.11 mb/d m/m in March to a six-month low of 1.09 mb/d (+66 thousand b/d y/y). April loadings are set to ease marginally, while the May schedule is broadly flat m/m despite maintenance season kicking off with the 14 thousand b/d Magnus field going offline in May. North Sea differentials came off sharply in mid-April, due to some prompt unsold Forties cargoes as margins weakened. However, we expect North Sea differentials to remain supported in the near term due to emerging Urals quality issues (organic chloride contamination). This led Belarus to reject Russian pipeline crude on 21 April, while Poland and Germany have halted imports as well. Meanwhile, some loadings from Ust-Luga have also been suspended. Any prolonged outage would be constructive for Brent spreads as regional refiners turn to North Sea grades as prompt replacement. Furthermore, scheduled maintenance at the Kashagan field (which went offline mid-March and is expected to remain offline through April) will be supportive for Forties as will heavy North Sea maintenance in June, including Ekofisk. UK’s Buzzard field is expected to go offline in July, constraining production by 30 thousand b/d for the month but in general, UK maintenance is low in 2019. This year, we expect 0.13 mb/d of new capacity (with total liquids production up y/y by 76 thousand b/d in our model), although the start-up of the 50 thousand b/d Mariner field has been delayed once again and we now expect first oil in Q4 19, from an original start-up date of 2017.
UK oil demand fell by 50 thousand b/d y/y from a record high to 1.54 mb/d in February, led by a 50 thousand b/d drop in diesel demand. Runs were broadly flat m/m in February at 1.13 mb/d and were higher y/y by 0.31 mb/d from a low base.