* Forties higher vs April, will load 22 cargoes
* Output seen as average for time of year
* Market over-supplied given weak refining demand
By Claire Milhench
LONDON, April 12 (Reuters) - North Sea oil output is set to fall by just over 2 percent in May from April, but supply remains ample by comparison with tepid refinery demand and is likely to keep Brent oil prices under pressure.
Output from 12 crude streams tracked by Reuters will average 1.934 million barrels per day (bpd) in May based on the latest information from loading schedules and trading sources, down slightly from 1.977 million bpd in April.
Traders characterised the output as "average" or "decent" for the time of year. "Norwegian production is a bit lower than expected, but altogether it's a normal, balanced market," one said.
The Brent benchmark is underpinned by four crude oils: Brent itself, Forties, Oseberg and Ekofisk (BFOE). Their output will add up to around 929,000 bpd in May, the latest loading schedules show, up from the 820,000 bpd that was originally scheduled for April and the 880,000 bpd that will actually load.
The April picture has been complicated by additions and deferrals in the Forties and Ekofisk programmes. Forties acquired an extra cargo in April, taking the total to 21, due to better-than-expected production from the major Buzzard oilfield.
But the biggest changes have occurred to Ekofisk, with five cargoes pushed into April from March after production problems, said by traders to be at the Valhall field.
One of the original April cargoes was subsequently dropped and two have been deferred into May. This means Ekofisk will now load 12 cargoes in April and 12 in May.
The Norwegian Petroleum Directorate confirmed on Thursday that output had fallen at the Oseberg, Skarv, Snorre, Troll and Valhall fields in March due to various technical problems.
Flotta, one of the smallest North Sea streams tracked by Reuters, is also experiencing difficulties. A market participant said the one cargo that was expected to load in April has now been deferred into May. It did not manage to load a cargo in March either.
Conversely, Buzzard, Britain's largest oilfield which feeds into the Forties stream, has been pumping for several weeks at its maximum rate of about 210,000 bpd. This has triggered the advancement of most of the Forties cargoes in April's programme and created a bumper May programme.
"It's too strong - always above plan," one market participant said of Buzzard's production. "There are quite a few options to advance out there."
The return of Total (NYSE: TOT - news) 's Elgin-Franklin field in March, almost a year after a major gas leak forced a shutdown, has also added about 70,000 bpd of condensate to Forties.
REFINERY RUN CUTS
Given the weak outlook for refinery demand and the possibility that North Sea crude flows to South Korea will decrease, the expected volume of supply is likely to prevent a rebound in Brent prices.
North Sea output can have a significant impact on world prices because the region is home to the dated Brent benchmark, which is used to price much of the world's physical oil and is part of the underlying market for Brent futures.
Although European refineries are now emerging from spring maintenance, crude feedstock demand has yet to pick up.
Instead, a fall in gasoline and naphtha margins in April is triggering refinery run cuts, with gasoline margins down from around $17.50 a barrel at end-March to $9 a barrel in April, and naphtha margins weak at minus $11.80 a barrel.
"We are seeing run cuts in the Mediterranean and a few northern European refineries in response to poor naphtha," one trader said. "But refinery maintenance will be tailing off, which will likely prevent Brent from falling much further."
Brent futures have tumbled from over $119 a barrel in mid-February to around $102 a barrel. There is now a contango of around 14 cents between the front and second contract months, but it was out as far as 25 cents in early April.
When the market is in contango, spot prices are lower than those for delivery at a future date.
One of the main factors weighing on the Brent price and Forties differentials is uncertainty over whether North Sea crudes will continue to go to South Korea beyond July 1, when tax changes may make these crudes less attractive to South Korean refiners.
The South Korean arbitrage has been a major support for the North Sea crude market since a Free Trade Agreement with the European Union was introduced in mid-2011.
According to Commerzbank (Xetra: 803200 - news) data, South Korea's oil imports from Britain surged by eight times to 24.8 million barrels last year, whilst its imports from Norway increased by nine times to 18.8 million barrels. Traders expect these flows to decrease but not disappear completely. (editing by Jane Baird)
