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Middle East Oil Demand - February 2017

Source: OPEC 3/1/2017, Location: Middle East

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In Saudi Arabia, December 2016 oil demand recorded a decline of around 80 tb/d or 3.5% y-o-y. Total consumption in the country stood at 2.21 mb/d, the lowest monthly total consumption for the month of December since 2013. In December 2016, growth in some of the main petroleum categories, notably LPG, jet/kerosene and fuel oil, failed to offset strongly shrinking demand in other product categories, including direct crude burning and diesel oil. Residual fuel oil consumption added more than 0.13 mb/d or around 36.8% to its values compared to December 2015. Low baseline effects, in addition to higher power generation usage, have led to increases in fuel oil consumption.

However, transportation fuels registered a mixed performance. Jet/kerosene recorded positive data, increasing by as much as 36.7%, supported by additional air travel activities. Meanwhile, gasoline and diesel oil registered flat and declining results, respectively, with the latter dipping by more than 0.17 mb/d or 22.0% y-o-y as a result of slower trucking and construction activities.

In cumulative terms, oil demand growth declined sharply in 2016 despite some positive momentum in some products, including LPG, fuel oil and diesel oil. Overall 2016 oil demand declined by approximately 0.10 mb/d, or more than 4.0%, y-o-y. Substitution to natural gas has led to dropping demand for direct crude for burning. Additionally, slower construction activities and overall economic momentum compared to recent history has resulted in the Other Products category dropping sharply on an annual basis in 2016. The Other Products category and direct crude burning dropped by 38.8% and 13.1%, respectively, in 2016.

Meanwhile, most of the other countries in the region recorded positive oil demand growth in December 2016. Oil demand in Iraq continued to increase for the second consecutive month, rising by a solid 0.11 mb/d y-o-y, while consumption in the Kuwait, Qatar and UAE, and were also on the rise.

Going forward, oil demand growth is foreseen gaining momentum over the levels experienced in 2016. This will mainly be the result of assumed improvements in the economy. In terms of countries within the region, Saudi Arabia is projected to be the largest contributor to growth. In contrast, geopolitical concerns as well as subsidy reduction policies are assumed to contribute negatively to demand growth in 2017. In terms of products, transportation fuels – particularly gasoline and diesel oil – are expected to lead oil demand growth.

For 2016, Middle East oil demand growth hovered around the zero level, while oil demand in 2017 is projected to increase by 0.11 mb/d.

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