Oil demand in the 10 top-consuming Middle Eastern countries (ex-bunkering) returned to declines in March, falling y/y by 0.25 mb/d to 5.78 mb/d. Saudi Arabian demand dropped by 0.21 mb/d y/y, led by crude burn (-80 thousand b/d y/y). Fuel oil demand (+15 thousand b/d y/y) increased due to higher-than-anticipated demand for power generation, as well as substitution with crude for burning. Although Saudi Aramco’s buying spree has eased in recent months following hefty restocking in Q1 19, with increased crude-for-product swaps from Greece and Kuwait in the spring, we believe Saudi Arabia is likely to turn to a net importer of fuel oil again in Q3 19. Gasoline (-11 thousand b/d) and diesel (-30 thousand b/d) demand were both down slightly y/y in March. Local cement sales dropped by 4% y/y in April, showing diesel demand weakness is likely to continue. Iraqi oil demand increased by 28 thousand b/d y/y in March, with fuel oil (-31 thousand b/d) being the only product to decline. In the UAE, jet demand may remain weak this spring as Emirates plans to reduce flights by 25% in the second half of April and in May, amid scheduled maintenance at Dubai International Airport (DXB).
Middle Eastern refinery runs fell by 0.32 mb/d m/m to 7.60 mb/d in March but were higher y/y by 0.20 mb/d. Saudi runs fell m/m by 0.28 mb/d (+7 thousand b/d y/y), even as the 0.24 mb/d Yanbu refinery came back online after 55 days of maintenance. Still, with weak demand, diesel exports were high at 0.70 mb/d. In May, the 0.4 mb/d SAMREF refinery was forced to shut one of its CDUs due to a technical problem and will run at 0.25 mb/d through month-end, weighing on runs. We forecast Middle Eastern runs at 7.97 mb/d across Q2 19, higher y/y by 0.37 mb/d, with planned CDU works currently expected to be 60 thousand b/d lower y/y at 0.19 mb/d.