Saudi oil demand could rise to nearly 1 million barrels a day |
[ Time:2020-07-23 | Hits:390 ] |
| As the Middle East enters the hottest days of summer, Saudi Arabia is likely to burn record amounts of crude oil to maintain power generation and provide its citizens with comfortable air conditioning. In the past, Saudi electricity consumption has always soared around July and August, when temperatures can exceed 122 degrees Fahrenheit. This forces the government to replace the cleaner natural gas used to generate electricity with crude oil or fuel oil. This year there are two other differences. On the one hand, as a result of the epidemic, many Saudis have cancelled overseas trips and many more have stayed at home, raising the prospect of a surge in domestic demand for electricity and oil consumption. On the other hand, the record drop in Saudi oil production since April, triggered by the COVID-19 threat and Opec + cuts, has also reduced the country's domestic supply of natural gas, most of which comes from the same Wells as crude oil. Opec + plans to scale back production cuts starting next month, but rising demand for oil used in power generation could limit its impact on prices. Saudi oil production in June was 7.5m b/d, the lowest since 2002, according to data compiled by Bloomberg. Saudi Arabia exports 5.7m barrels a day, with most of the rest going to domestic refineries. Says Carole Nakhle, CEO of Crystol Energy, an Energy information company. "They can choose to import more natural gas or burn more crude oil in the process of generating electricity. The latter is more likely and easier because this is what the Saudis have been doing for years and now they have a lot of oil." The Riyadh-based Joint Organisations Data Initiative consolidates Data from energy producers. For the past decade, Saudi Oil used for power generation averaged 726,000 barrels a day in August each year, the data show. That's more than twice as much as in cooler January and February. The record was reached in July 2014, when Saudi Arabia consumed 899,000 barrels of oil a day. Saudi Arabia has scaled back production cuts. At the end of June, it stopped voluntarily cutting an additional 1m barrels and said it needed to spend most of the increase domestically. Saudi Energy Minister Adel Al-Aziz said in early June: "Our oil consumption will increase. A large part of the oil that we produce in July will be used for domestic consumption, which is burning for power generation, not refining." It is important to note that although Saudi domestic crude oil demand means that easing production will not lead to more crude oil will flood the market in a short time, cause the excess supply, but for Saudi Arabia cut use of fossil fuels (pollution) plan, nearly 1 million barrels of oil a day to generate electricity is a step backward. Iman Nasseri, managing director for the Middle East at LONDON-BASED oil consultancy FGE, said the Government appeared to be moving closer to that goal before the outbreak, especially after capacity was increased at local gas processing plants. But now we might have to go back to the beginning. It is not just Saudi Arabia, but other Gulf Arab countries whose long-term plans to reduce oil and increase gas use could be undermined. With unemployment soaring in commercial centres such as Dubai and many foreigners leaving, energy executives are questioning the need for more gas projects. The impact of the investment cuts will not be felt this summer, but will delay new supply growth for years to come. The Gulf Arab states are among the world's largest per capita consumers of energy, in part because many of them subsidize it. According to BP's latest World Energy 2020 Statistical yearbook, Saudi Arabia's per capita energy consumption in 2019 was 322 gigajoules, almost three times the European average and more than four times the global average. |