Middle Eastern oil demand growth rebounded in March, rising by 0.4 mb/d y/y to 6.04 mb/d, led by Saudi Arabia, where demand rose by 0.34 mb/d y/y to 2.4 mb/d following a 0.16 mb/d y/y decline in February amidst adverse weather. The weather returned to normal in March (CDDs were 1.3% higher y/y) which, combined with increased demand from industry, boosted demand for fuel oil (up 0.2 mb/d y/y). Direct crude burn increased y/y in March by 46 thousand b/d, though we expect this to slow in the summer, as crude in power generation is displaced by natural gas from the Wasit gas plant. This led to a 9 mb m/m draw in crude stocks to below 300 mb, the lowest since September 2014. Gasoline demand rose by 13% y/y to 0.58 mb/d. Even with the reduction in subsidies late last year, gasoline demand has risen y/y by 7.3% between November 2015 and March this year. Saudi jet demand rose y/y by 29%, as Middle Eastern air passenger traffic grew by 12% y/y. Oil demand in Qatar increased y/y by 37%, while Iraqi demand fell by 2.8% to 0.51 mb/d, as a result of slow growth in the transportation and industrial sectors. We estimate that Iranian demand rose again y/y by 26 thousand b/d to 1.77 mb/d, while sharp spending cutbacks in infrastructure are likely to weigh on UAE demand.
Middle Eastern refinery runs fell m/m in March to just under 7.2 mb/d, led by Saudi Arabia, where runs fell by 96 thousand b/d to below 2.6 mb/d, although they were still higher y/y by a massive 0.67 mb/d. Runs in the UAE were also low due to planned works at the older Ruwais refinery. Meanwhile at least three Iranian refineries are offline in April and May, including the 0.17 mb/d Khomeini, and 0.15 mb/d Abadan facilities. Maintenance is expected to rise in H2 16 because of overdue maintenance in Saudi Arabia, including at Yasref and Ras Tanura.