(Bloomberg) -- Saudi Arabia may push more crude oil into power generation as it faces sizzling summer temperatures, providing the demand boost that bulls have been waiting for.
The use of crude oil in power generation may rise to as high as 800,000 barrels a day during the summer as a way to soak up excess supplies from the market, said Vikas Dwivedi, a global oil and gas strategist for Macquarie Group. The move may give a boost to oil prices, which recently fell below $70 a barrel.
“There are some signs that they may use more crude oil to produce electricity than in previous years as a way to help manage global supplies,” Dwivedi said in a interview. The Saudi move could send Brent prices near $80 a barrel in the third quarter.
Power plants in the kingdom can produce electricity from a variety of feedstocks, including natural gas, fuel oil and crude. Last year, demand for crude for electricity generation rose to 671,000 barrels a day between June and August, up 53% from the previous three months, according to data from the Joint Organizations Data Initiative.
Average temperatures during the Saudi summer can be as high as 109F (43C).
©2023 Bloomberg L.P.
Advertisement