Saudi Arabia has significantly increased its imports of the dirtiest type of oil to the highest level in over three years to meet power demand during the scorching summer months.
In June, shipments of fuel oil rose to their highest since at least the end of 2020, and this elevated level is expected to continue this month, according to data from market researchers Kpler and Vortexa. Purchases, which typically surge during the hottest months due to increased air conditioner use, have increased up to fourfold since March to about 350,000 barrels a day, according to Vortexa.
As the region’s largest buyer of fuel oil—a heavy, polluting byproduct left over after refineries produce transport fuels like gasoline and diesel—Saudi Arabia also burns crude oil directly to produce electricity. This 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 Bloomberg data. Fuel oil is generally sold at a discount to crude because it is heavier and more polluting.
This week, temperatures in Riyadh hovered in the mid-40s Celsius (around 110-115 degrees Fahrenheit) and can exceed 50C (122F) in the summer, driving up electricity demand for air conditioning and forcing the kingdom to burn more oil.
Saudi Aramco, responsible for the kingdom’s oil shipments, declined to comment on the fuel oil imports.
Saudi Arabia plans to stop burning liquid fuels for power this decade as it targets net-zero emissions by 2060. Crown Prince Mohammed bin Salman, pursuing a rapid modernization program, has pledged to increase solar and wind generation. Last month, state oil producer Saudi Aramco signed $25 billion worth of contracts to pump natural gas from the Jafurah field, which will be used in power plants.
The company aims to provide enough gas to replace all liquid fuels in power plants by 2030, freeing up approximately 1 million barrels a day of crude oil currently used domestically in the summer for exports.
Saudi Arabia buys most of the fuel oil produced by Iraq and Bahrain and also imports cargoes from the United Arab Emirates. In April, the kingdom resumed purchases from Russia after a five-month pause. Supplies from Russia have nearly doubled since then but remain below last summer’s levels.
Overall, fuel oil imports are expected to stay elevated in July, with Kpler and Vortexa forecasting around 300,000 barrels a day of purchases so far this month.
