- Fuel oil imports in June highest since at least November 2020
- World’s biggest crude exporter buys fuel oil for power plants
Saudi Arabia boosted imports of the dirtiest type of oil to the highest in more than three years to help meet power demand during the scorching summer.
Shipments of fuel oil rose in June to the most 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 that’s left over after refineries produce transport fuels like gasoline and diesel. 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, according to data compiled by Bloomberg. Fuel oil is mostly sold at a discount to crude since it’s heavier and more polluting.
Temperatures in Riyadh hovered in the mid-40Cs this week, according to AccuWeather, and can top 50C (122F) in the summer. The heat drives demand for electricity to power air conditioners, which in turn 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. State oil producer Saudi Aramco last month signed $25 billion contracts to pump natural gas from the Jafurah field for use including 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 both Kpler and Vortexa already expecting roughly 300,000 barrels a day of purchases so far this month.
(Updates with Aramco declining to comment in the fifth paragraph.)
