Saudi Arabia could use this summer record amounts of crude oil for producing electricity as more Saudis would stay at home rather than travel on vacation abroad because of the pandemic, according to Bloomberg estimates of analysts.
Saudi Arabia burns crude oil for power generation and this summer it could be on track to burn record volumes of crude to keep air conditioning on while temperatures outside could reach 120 degrees Fahrenheit.
The burning of more oil is a setback from earlier Saudi plans to reduce its reliance on crude for electricity generation. Saudi Arabia also has less natural gas to use for power generation this summer because the ongoing OPEC+ oil production cuts affect the associated natural gas production at its oil fields.
The Saudi choice for power generation this summer is either importing more natural gas or burning more crude oil, Carole Nakhle, chief executive officer at London-based consulting firm Crystol Energy, told Bloomberg.
"The second option is more likely and easier since the region has been doing this for years and decades and there is plenty of oil around today," Nakhle said.
The higher crude-for-power-generation will absorb the extra crude oil production from Saudi Arabia after the OPEC+ cuts are eased from August 1, Saudi Arabia's Energy Minister, Prince Abdulaziz bin Salman, said earlier this month.
Despite the higher production resulting from the eased cuts, the world's largest oil exporter said last week that it would keep its crude oil exports in August at the levels from July.
"I can tell you that in the Kingdom Saudi Arabia, due to the increase in demand from utilities and other sectors, as lockdowns ease, we estimate approximately 500,000 barrels per day of extra demand in August. So, despite a higher production target in August, there will be no change in our exports," Prince Abdulaziz bin Salman said last week at the Joint Ministerial Monitoring Committee (JMMC) meeting.
By Tsvetana Paraskova for Oilprice.com
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