Saudi Arabia will increase its oil production this month as electricity use in the kingdom is expected to rise in July and August. During the period, Middle Eastern countries enter the hottest days of summer when the temperature can rise above 50 degrees celsius. This will boost demand for crude, fuel oil, and natural gas to be burned at the kingdom’s power plant.
In the past decade, Saudi Arabia burned an average of 726,000 bpd of crude to generate power. However, oil demand from the power sector is expected to increase this year as many Saudis will likely prefer to stay at their homes amid the coronavirus pandemic and the country’s associated gas production declines due to OPEC+ supply cuts.
Saudi Arabia produced 7.5 million bpd of crude in June, the lowest in 18 years, Bloomberg data showed. The kingdom exported 5.7 million bpd of those and kept the rest for domestic consumption. The country had already restored some curbed oil production by the end of June and ended 1 million bpd voluntary cuts outside OPEC+ quota.
Last month, Saudi Energy Minister Prince Abdulaziz bin Salman said most of the increased output would meet the domestic demand. Some analysts warned that more supply from the country could underpin OPEC+ push to support global oil prices. It also provides the kingdom with setbacks in its drive to reduce carbon-intensive fuel for electricity generation.
