Middle Eastern oil demand for the top 10 countries ex-bunkering fell y/y by just 20 thousand b/d to 5.9 mb/d in March, despite Saudi oil demand falling y/y by 0.24 mb/d (10%) to 2.13 mb/d. Crude and fuel oil, used for direct power generation, fell sharply by 92 thousand b/d and 0.12 mb/d, respectively. We expect crude burn to peak at just 0.59 mb/d this year, even though the displacement from the Wasit gas plant start-up is behind us. But the 75 mcf/d Midyan gas plant started up late last year, while the 2.6 GW Shuqaiq fuel oil plant is about to start-up. The weakness in diesel returned (lower y/y by 15%), driven by a lull in construction activity, with contract awards in the year-to-April contracting y/y by 77% to $1.3 billion. LPG, gasoline and jet/kerosene increased y/y by around 11%, 7% and 9%, respectively. Transportation fuel demand is likely to see tailwinds from some of the policy rollbacks (restoration of civil service and military allowances). Elsewhere, in the region, demand is very strong, helping Q1 17 Middle Eastern demand rise y/y by 0.12 mb/d even with Saudi demand lower y/y by 0.13 mb/d. March Kuwaiti demand grew by 29 thousand b/d while Iran was up by 21 thousand b/d y/y. Iraqi demand also remains strong, up y/y by 0.13 mb/d on strong gains in industrial usage and transport fuels.
Regional refinery runs were lower y/y by 97 thousand b/d to 7.18 mb/d, with 0.38 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, while the 0.22 mb/d Ras Tanura splitter is offline in May. Product exports are likely to rise after Ramadan as restocking ends, coinciding with refineries returning from works.