Middle Eastern oil demand for the top 10 countries ex-bunkering grew y/y by 0.28 mb/d to 6.08 mb/d in February. This marks the third consecutive month of growth, following y/y declines of 0.16 mb/d in Q4 16. Growth was led by exceptionally strong demand from Iraq, up y/y by 0.12 mb/d (21%), driven by a low base that suggests growth can continue through October. Saudi demand also recovered, rising y/y for the first time since September 2016, by 57 thousand b/d (3%). However, the divergence between different products continues. Fuel oil demand rose by 0.13 mb/d, while diesel demand fell by 59 thousand b/d y/y. Even as crude burn falls (lower y/y by 3%), with gas displacement and lower electricity demand, the Kingdom is using more fuel oil in the sector, and February’s gain comes on the back of the 2.6 GW Shuqaiq plant coming online. The weakness in diesel demand abated somewhat (-14% over H2 16 and -18% y/y in January) and is linked to the improvement in the non-oil private sector towards the end of Q1 17. But headwinds remain over H2 17 from the anticipated hike in energy prices from July, cuts in public expenditure directed at shelving unfinished projects, and the aftereffects of recently introduced energy efficiency measures. Demand in Qatar (+ 18 thousand b/d y/y) and Kuwait (+22 thousand b/d y/y) continued to grow. Growth in the UAE (+ 86 thousand b/d y/y), was tempered due to the snowstorms, although healthy construction activity in Dubai, Sharjah and Abu Dhabi offset.
Regional refinery runs were lower y/y by 0.17 mb/d to 7.42 mb/d, with 0.46 mb/d of CDU capacity offline. In Abu Dhabi, the Ruwais refinery FCC will remain offline until at least Q1 18, prompting ADNOC to import gasoline to meet domestic requirements, especially ahead of Ramadan, which begins end-May. The 0.13 mb/d Riyadh refinery is also offline, for 80 days as of 1 March.