Middle Eastern oil demand picked up seasonally to 5.57 mb/d in April, higher m/m by 0.2 mb/d, with the onset of the summer seeing temperatures rise well above last year's levels, supporting demand. This constituted a y/y increase of nearly 0.35 mb/d, and we expect this strength to continue given the possibility of record high temperatures. Saudi Arabia led the rise in April, with demand picking up by a strong 0.31 mb/d to 2.35 mb/d, higher y/y by 0.28 mb/d. This was the highest April demand on record by a sizeable margin, led by the strongest fuel oil and crude burn demand for the month as well. Fuel oil demand picked up sharply to 0.38 mb/d, higher y/y by 0.18 mb/d, while crude burn was just shy of 0.5 mb/d, higher y/y by 0.11 mb/d. There has been a clear shift towards switching away from diesel to fuel oil for baseload power generation in the Kingdom, following the ramp up of its new fuel oil plants, and this divergence will only worsen with the start-up of the 2,700MW Yanbu 3 power plant due online by early 2016. Indeed, in the year-to-date, diesel demand has been slightly lower y/y (including in April) adding to the already weak diesel balances, while fuel oil demand is running higher by over 80 thousand b/d. Meanwhile, higher crude burn will mean the Kingdom will have to ramp up its production in the summer months to record levels of 10.5-11 mb/d or reduce exports, especially with Ramadan coinciding with peak summer months of June and July. Tanker tracking data suggests a sharp fall in Saudi exports to the US in July.
Middle Eastern refinery runs fell back slightly in April, lower m/m by 0.17 mb/d, with Saudi runs falling to 1.85 mb/d due to works at the Petro Rabigh and Riyadh refineries. Unplanned outages at Oman's Sohar refinery also weighed. We see regional runs rising to 7 mb/d in July.