Oil demand eased substantially from December 2016’s record high of 2.76 mb/d to 2.54 mb/d in January, and fell y/y by 4 thousand b/d, the first fall since May 2015. Demand for the main four products fell by 87 thousand b/d, the sharpest decline since August 2014. Diesel demand fell by 39 thousand b/d, as manufacturing PMI eased to 49 while manufacturing jobs shrank by the largest scale in nearly eight years—weighed down by the troubled shipbuilding and shipping sector. Gasoline fell by 15 thousand b/d y/y, while jet demand was also down marginally. Fuel oil fell for the third straight month, as HDDs were down by 5% y/y and more nuclear capacity returned from maintenance (5.7 GW offline vs 6 GW in December 2016). Partially offsetting this weakness however, were robust margins in the petrochemicals sector which buoyed LPG and naphtha. LPG demand grew y/y by 76 thousand b/d, led by propane. Naphtha demand pushed up to 1.23 mb/d, higher y/y by 38 thousand b/d, on switching by petrochemical plants due to soaring prices of heavier steam cracking co-products such as butadiene and benzene.
Refinery runs rose to a record high of 3.17 mb/d, higher y/y by 0.22 mb/d, as new splitter start-ups and robust export margins supported utilisation rates of above 100%. Crude imports fell by 0.2 mb/d m/m, dragging crude stocks down m/m by 3.9 mb. With ADNOC deciding to sell April Murban from its 6 mb storage held in Korea amidst broader OPEC cuts, crude stocks should continue to fall. Gasoline exports jumped to 0.25 mb/d, as gasoline yields jumped to 14.4%, only down by 0.5 ppts y/y, partly due to Korea lightening its crude slate amidst tighter heavy crude markets. Indeed, imports from Saudi Arabia fell sharply by 0.16 mb/d m/m to 0.79 mb/d. As new splitters started up, jet yields rose sharply as well, to 17.7%, while those of diesel and fuel oil fell.