In March, oil demand in Saudi Arabia reversed the previous month’s trend, increasing y-o-y by a strong 0.3 mb/d, or around 17%. Most of this growth is driven by fuel oil and jet/kerosene, which grew by more than 57% and 29%, respectively.
Fuel oil in Saudi Arabia feeds into two major sectors and is ultimately used as a power generation fuel. The largest portion feeds utility requirements, generating power mainly in the western part of the country, while the other portion feeds into industrial sector requirements, more specifically to run boilers and power generation units at mega sites. Both sectors contributed positively, as demand for power generation increased due to weather conditions and power generation fuel demand rose for new refineries in the country.
Jet/kerosene demand growth also rose substantially during the month, receiving support from the aviation sector. Gasoline increased by around 13% y-o-y, despite government reductions in subsidies at the beginning of the year. Overall demand in 1Q16 has been largely positive, rising roughly by around 6% y-o-y, with volatile movement throughout the quarter. Jet/kerosene led demand growth, followed by fuel oil and gasoline. Total product consumption was pegged at 2.20 mb/d during the first quarter, compared with 2.13 mb/d for 1Q15.
Other countries in the region showed a mixed performance. While oil demand in Iraq declined marginally by 15 tb/d, consumption in the UAE, Kuwait and Qatar was on the rise. Going forward, Middle East oil demand is subject to the performance of various economies in the region, with lower oil prices impacting spending plans. However, weather conditions will play a major role in oil consumption during the summer, should the weather turn out to be warmer than currently expected.
Middle East oil demand in 2015 increased by 0.26 mb/d, and is projected to increase by 0.15 mb/d in 2016.