Oil demand in the 10 top-consuming Middle Eastern countries (ex-bunkering) continued to decline in July, falling y/y by 49 thousand b/d to 6.46 mb/d even as Saudi Arabian demand gained by 0.11 mb/d, with Saudi crude for direct burning (-56 thousand b/d y/y) the only product to decline. Saudi diesel (+32 thousand b/d y/y) demand rose y/y in consecutive months for the first time since January 2016, in line with a pickup in construction activity. Cement sales increased in August for the third straight month, suggesting that the uptick in diesel demand is likely to continue. Consequently, diesel exports from the region have been down y/y since July, declining by 46 thousand b/d in August, according to Kpler. Saudi gasoline (+29 thousand b/d y/y) demand was supported by an increase in driving during the summer holidays, although will likely remain under pressure due to the rise in domestic prices. Jet fuel (+84 thousand b/d y/y) grew strongly due a low baseline and support from the holiday travel season, although Middle Eastern passenger growth has continued to slow since H1 18, up by just 1.8% y/y in July. Fuel oil demand (+32 thousand b/d y/y) grew seasonally on a rise in heating demand, making the Kingdom a net fuel oil importer for the second straight month. Iraqi demand declined for the fourth consecutive month, led by fuel oil (-31 thousand b/d y/y). Kuwaiti demand (-83 thousand b/d y/y) fell too.
Middle Eastern refinery runs fell by 15 thousand b/d m/m (-0.33 mb/d y/y) to 7.62 mb/d. Across Q3 19, we forecast runs at 7.64 mb/d, lower y/y by 0.26 mb/d, as runs were cut at many Saudi refineries following disruption to crude production arising from the attacks in mid-September. In September, we expect Saudi diesel and jet exports to fall and gasoline imports to rise, in order to meet domestic demand and with domestic refinery runs curtailed by 1 mb/d.