Saudi Arabia summer heat to drive domestic oil demand

Demand for oil in Saudi Arabia is projected to jump as much as 20 percent during the sweltering summer this year compared to 2014, Reuters reported.

Demand for oil in Saudi Arabia is projected to jump as much as 20 percent during the sweltering summer this year compared to 2014, Reuters reported.

Weather Online stated Saudi Arabia usually sees temperatures up to 54°C (about 129°F) in the warmest months. The average temperature in Saudi Arabia in the summer heat is 45°C (113°F). With the increase in temperature in this time, power plants will likely need 20 percent more fuel oil in 2015 than the previous year, according to Reuters.

To offset the need for greater oil imports, Saudi Arabia boosted new capacity at refineries in Yanbu and Jubail by 800,000 barrels per day since two years ago.

In the past summer, Saudi Arabia burned more oil than it has in recent years and this trend could continue in 2015. The Joint Organizations Data Initiative noted that Saudi Arabia burned 0.9 million bbl/d of oil in July 2014 - the highest level of oil since August 2010. The country is by far the biggest consumer of crude oil in the Middle East.

"Saudi Arabia used an average of 0.7 million bbl/d of crude oil for power generation during the summers from 2009 to 2013," the U.S. Energy Information Administration wrote in a blog in 2014. "During that same period, Iraq and Kuwait, the next two largest users of crude oil for power generation in the Middle East, each averaged roughly 0.08 million bbl/d of crude burn."

Demand for oil this year
This year, the trading unit of national oil and natural gas firm Saudi Arabian Oil Company purchased between 300,000 to 1.5 million barrels of gasoil for May delivery and between 1.2 million to 2.5 million barrels of gasoil for June.

Although there is greater refining capacity to help meet demand for petroleum products, there has been little change to fuel oil production, Energy Security Analysis, Inc. and Energy Aspects said. The market research and strategic advisory services firm and independent research consultancy predicted fuel oil demand will rise from 300,000 to 410,000 bbl/d in 2014 to 420,000 to 430,000 bbl/d this year.

This could cause problems as fuel oil demand in Saudi Arabia is increasing but output has not caught up.

In the future, power generation demand could be exacerbated by population increases. The EIA cited Saudi Arabia's Central Department of Statistics & Information that stated the country's population rose 2.55 percent in 2014.

More information on the power market in Saudi Arabia can be found on PennEnergy's research area.

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