Story Credit| Anthony Di Paola | Bloomberg | Saudi Arabia boosted imports of the dirtiest type of oil to the highest in over three years to help meet power demand during the scorching summer.
Shipments of fuel oil rose in June to the highest level since at least the end of 2020 and are expected to remain elevated this month, according to data from market researchers Kpler and Vortexa. Purchases, which typically jump during the hottest months as air conditioners crank up, have risen as much as fourfold since March to about 350,000 barrels a day, according to Vortexa.
Saudi Arabia is the region’s biggest buyer of fuel oil, a type of dirty product left over after refineries produce transport fuels like gasoline and diesel. According to data compiled by Bloomberg, it also burns crude oil directly to produce electricity, which likely contributed to the kingdom’s exports dropping to a 10-month low of about 5.6 million barrels a day in June. Fuel oil is mostly sold at a discount to crude since it’s heavier and more polluting.
According to AccuWeather, temperatures in Riyadh hovered in the mid-40s this week and can top 50C (122F) in the summer. The heat drives demand for electricity to power air conditioners, which forces the kingdom to burn more oil.
Saudi Aramco, which handles oil shipments for the kingdom, declined to comment on the fuel oil imports.
Time to Stop
Saudi Arabia aims to stop burning liquid fuels for power this decade as it targets net zero emissions by 2060. Crown Prince Mohammed bin Salman, pursuing a breakneck modernization program, has pledged to ramp up solar and wind generation. Last month, state oil producer Saudi Aramco signed a $25 billion contract to pump natural gas from the Jafurah field for use in power plants.
The company plans to provide enough gas to replace all the liquid fuel in power plants by 2030, freeing up roughly 1 million barrels a day of crude used domestically in the summer months for exports.
Saudi Arabia buys most of the fuel oil that Iraq and Bahrain produce, while also importing cargoes from the United Arab Emirates. In April, the kingdom resumed purchases from Russia after a five-month pause. Supplies from there have nearly doubled since then though are still below the levels of last summer.
Overall fuel oil imports are set to remain elevated again in July, with Kpler and Vortexa already expecting roughly 300,000 barrels a day of purchases this month.
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