Saudi Arabia is expected to burn over 1 million barrels per day (bpd) of crude and imported fuel oil for power generation this summer, as the ongoing Iran war curtails natural gas output and forces a reversal of the kingdom's clean energy ambitions.
"The sharp increase in fuel oil imports is a leading indicator that oil burn will rise above year-ago levels," Rahul Choudhary, vice president of oil & gas research at consultancy Rystad Energy, said.
The shift comes as gas output slipped to 10.5 billion cubic feet per day (bcfd) in the first quarter, down from 10.7 bcfd in the previous quarter. To compensate, state-owned Saudi Aramco ramped up fuel oil imports to approximately 360,000 bpd in April, an 86% increase compared to the same period last year, according to Vortexa data. This follows a record low in crude exports, which plummeted to 4.974 million bpd in March, according to the Joint Organisations Data Initiative (JODI).
The increased domestic oil consumption highlights the far-reaching consequences of the regional conflict, which has effectively blockaded the Strait of Hormuz. This not only tightens global crude supply by forcing Saudi Arabia to divert oil for domestic use but also sets back the kingdom's multi-billion dollar strategy to reduce domestic emissions by switching power plants to natural gas and renewables.
A Setback for Clean Energy Goals
The reliance on oil for power generation marks a significant setback for Saudi Arabia's goals to transition to cleaner fuels. The kingdom's power demand typically peaks in August due to high air conditioning use. The burning of crude and fuel oil for power could breach the 1 million bpd mark this summer, undoing the progress that saw consumption fall to a low of 991,000 bpd in 2025.
While Saudi Aramco is prioritizing its more expensive Arab Light crude for export via the East-West pipeline to the Red Sea, analysts are divided on how much crude will be burned domestically. Rystad Energy projects an average of 540,000 to 550,000 bpd of crude burn this summer. In contrast, Wood Mackenzie expects a slight decrease, arguing that every barrel burned domestically represents a significant loss in export revenue.
Exports Rerouted Amid Conflict
The conflict has choked off the Strait of Hormuz, a critical artery for global oil shipments. In response, Saudi Arabia has maximized the use of its 7 million bpd East-West pipeline to transport crude to the Red Sea port of Yanbu. However, logistical constraints at Yanbu limit actual export capacity to around 5 million bpd. This rerouting keeps a fraction of Saudi oil flowing to global markets but at a higher cost and with significant delays, particularly for Asian customers. The kingdom's crude production in March fell to a record low of 6.967 million bpd, JODI data showed, reflecting the severe impact of the disruptions.
This article is for informational purposes only and does not constitute investment advice.
