Middle Eastern December oil demand growth for the top seven countries eased to just 77 thousand b/d, at 5.77 mb/d, the slowest pace since April 2015. The weakness originated from Saudi Arabia, where demand declined y/y by 0.11 mb/d, the steepest fall since September 2013. Low power generation as the weather turned cooler (CDDs were lower y/y by 18%) limited fuel oil demand, down y/y by 0.27 mb/d, offsetting sustained growth from transportation and industrial fuels. Indeed, gasoline, diesel, and jet demand rose y/y by a collective 0.15 mb/d, with diesel up y/y by nearly 0.1 mb/d. Elsewhere, Iraqi demand rose y/y for the seventh consecutive month, by 9.3%, to 0.62 mb/d, led by fuel oil, up by 21%, due to frequent disruptions to the electricity network. Demand in Kuwait, Qatar, and Oman rose collectively by 81 thousand b/d. However, the sharp decline in oil prices has put a brake on infrastructure projects in the region, with UAE diesel demand around 30% lower than peak 2015 demand. Much like Saudi, Iranian fuel oil demand fell sharply, by 0.15 mb/d y/y, amidst fewer CDDs and greater gas penetration in the power sector, although diesel and gasoline demand remained strong, higher y/y by 11% and 15%, a trend expected to continue this year.
Refinery runs rose to 7.3 mb/d in December, with diesel output rising to a record 2.37 mb/d. January runs stayed above 7 mb/d, although eased m/m due to an outage at the Ruwais refinery. Runs are set to dip in March as major works at Oman’s 0.12 mb/d Sohar refinery starts. The older section of UAE’s 0.82 mb/d Ruwais refinery (0.27 mb/d) will also shut in March for 45 days, curbing diesel and jet exports, particularly as repairs to the refinery’s new 0.127 mb/d RFCC are set to last to mid-March, which has led to small dip in runs at the new refinery.