Oil demand in the 10 top-consuming Middle Eastern countries (ex-bunkering) dropped y/y by 61 thousand b/d to 5.96 mb/d in October. Saudi Arabian demand plummeted once again, by 0.19 mb/d y/y to 2.16 mb/d, led again by crude burn (-75 thousand b/d y/y), which continues to be substituted for natural gas and fuel oil (+37 thousand b/d). Iraq continues to be the region’s strongest performer, with demand growing by 0.14 mb/d in October. Gains in Iraqi demand were recorded across most of the barrel, led by fuel oil (+0.10 mb/d y/y) and diesel (+32 thousand b/d y/y). A contraction in Kuwaiti oil demand was recorded for the third straight month (-41 thousand b/d y/y). While Middle Eastern demand looks set to come in lower y/y by 0.1 mb/d in 2018, we foresee a small rebound in 2019 (+0.1 mb/d y/y), with Saudi demand expected to rise modestly as austerity measures are wound down gradually, helped by a low base.
Middle Eastern refinery runs rose m/m by 0.2 mb/d to 8.0 mb/d in October, higher y/y by 0.5 mb/d. But growth in runs was limited by changes made to the crude export slate in order to offset lost Iranian South Pars condensate volumes. Saudi Arabian runs gained m/m by 0.19 mb/d to 2.82 mb/d, higher y/y by 0.13 mb/d, though we suspect they are being overstated given that unplanned outages led to lower product supplies. Saudi diesel exports were massive again in October, rising y/y by 0.23 mb/d to a record 0.92 mb/d, while the Kingdom remained a net fuel oil importer for the sixth straight month (72 thousand b/d). Meanwhile, the 0.13 mb/d RFCC at the UAE’s Ruwais 2 refinery is in its final stages of commissioning, having been shut since January 2017 following a fire, and will boost Middle Eastern runs and gasoline output in the coming months. Across Q1 19, we forecast Middle East throughputs at 7.7 mb/d, higher y/y by 0.2 mb/d.