Oil demand in the 10 top-consuming Middle Eastern countries (ex-bunkering) rebounded in January, rising y/y by 12 thousand b/d to 5.92 mb/d. Saudi Arabian demand rose by 15 thousand b/d y/y, led by crude burn (+50 thousand b/d y/y). Gasoline (+19 thousand b/d y/y) and fuel oil (+5 thousand b/d y/y) also gained, while diesel declines eased to just 3 thousand b/d y/y. Local cement sales dropped by 3% y/y in February, so diesel demand was likely to have been lower y/y last month as well. For 2019, we expect another reduction in Saudi diesel demand (around 3% y/y to 0.50 mb/d) due to construction project cancellations and postponements. Despite this, we expect Middle Eastern demand to rebound across Q1 19 by 0.1 mb/d y/y, with Saudi Arabia growing by 50 thousand b/d. Kuwaiti demand fell by 73 thousand b/d y/y in January, mostly offsetting gains elsewhere. Iraqi consumption continued the growth trend witnessed in 2018, rising y/y by 33 thousand b/d in January, with growth seen across the barrel.
Middle Eastern refinery runs rose by 21 thousand b/d m/m to 7.95 mb/d in January, 0.42 mb/d higher y/y. Saudi Arabia led the growth, rising by 0.14 mb/d y/y, while Iraq gained by 87 thousand b/d. Across Q1 19, we forecast runs at 7.86 mb/d, higher y/y by 0.42 mb/d, with planned CDU works currently expected to be 0.3 mb/d lower y/y at 0.3 mb/d. Saudi January diesel exports remained elevated at 0.79 mb/d, broadly flat y/y but 0.36 mb/d higher than the five-year average. Diesel exports are likely to have remained high in February, though they could ease in March with the Yanbu refinery down for works across the month. Saudi remained a net fuel oil exporter for the third straight month in January, although buying activity by Aramco ahead of peak summer demand and Ramadan (which starts on 5 May) is on the rise.