Oil demand in the 10 top-consuming Middle Eastern countries (ex-bunkering) fell y/y by 0.30 mb/d to 6.2 mb/d in June. Demand contracted by 0.15 mb/d y/y across Q2 19, compared with an 8 thousand b/d expansion in Q1 19. Saudi demand dropped by 0.22 mb/d y/y, with crude for direct burning (+82 thousand b/d y/y) and diesel (+1 thousand b/d) the only products to register a rise. June was the first month since January 2016 that Saudi diesel demand did not decline, with support in line with recovering cement sales, which rose in June and July on a pick-up in construction activity. Kpler data show diesel exports from the region fell by 0.3 mb/d m/m in July, in part due to unplanned refinery outages but also likely due to higher domestic demand. Jet (-0.20 mb/d y/y) led the declines, due to a high base, despite Middle Eastern passenger growth hitting a 12-month high of 8.1% y/y in June. We expect regional jet fuel demand to have remained firm in July and August due to the Hajj pilgrimage. Kpler data showed net jet exports from the Gulf were lower by 0.30 mb/d y/y in July. Fuel oil demand (-8 thousand b/d y/y) fell in June, despite a seasonal uptick in cooling demand. Ongoing tensions in the region continue to weigh on fuel oil demand as bunkering is diverted away from the Gulf. Saudi gasoline (-43 thousand b/d y/y) demand is likely to remain under pressure as domestic prices have increased in Q3 19 to date. Iraqi demand declined for the third consecutive month, while Kuwaiti demand also fell y/y.
Middle Eastern refinery runs dropped by 84 thousand b/d m/m (-0.18 mb/d y/y) to 7.6 mb/d, with Saudi (-0.29 mb/d y/y) runs falling due to an unplanned outage at SAMREF’s 0.13 mb/d FCC. Across Q3 19, we forecast runs at 7.93 mb/d, higher y/y by 27 thousand b/d, even with unplanned outages at the Mina al-Ahmadi, SATORP and Ruwais West across July and August.