Saudi Arabia cools down by raising imports of Russian oil

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• Electricity demand up due to heat
• Imports oil for domestic needs
• Record use of Kuwaiti oil in July

An unusually hot summer is forcing Saudi Arabia, the world’s largest crude oil exporter, to increase fuel imports from Russia and Kuwait to meet peak domestic demand for electricity. 

The Gulf state is importing thousands of tonnes of discounted Russian oil, while imports from Kuwait also made a strong comeback in July after a two-year hiatus, analysts said.

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Saudi Arabia has imported on average 510,000 tonnes per month from Russia over the past three months, equivalent to around 3.4 million barrels, according to Kpler, a data provider.

Imports from Kuwait surged to a record high of 210,000 tonnes in July, the first such transaction since May 2022.

The July imports jumped by over half year-on-year and by 4 percent month-on-month.

“The increased demand for fuel oil in the Saudi power sector can be attributed to an unusually hot summer,” Palash Jain, Middle East oil analyst at Facts Global Energy, told AGBI. 

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Jain said that, in addition, the Saudi Aramco Shell Refinery, one of the largest in the world, was under maintenance from April to June, which may have limited the kingdom’s ability to build fuel oil stocks. 

Saudi Arabia is trying to stop burning liquid fuels for power generation by increasing natural gas use and building renewables capacity. However, a full transition is a long way off. For now, the country is “short in fuel oil,” Jain said.

Direct crude burns, despite a 17 percent year-on-year decrease in May, remained high as well. “Huge demand for electricity for cooling during the sweltering summer months suggests direct crude use could still see notable upside,” Kpler said.

In June 2023 Saudi Arabia imported record volumes of discounted Russian fuel oil. This allowed the Gulf state to conserve its crude oil for exports at higher prices. 

But in recent months Russia has managed to develop “new trade channels for redirecting its fuel oil exports after Europe’s ban on Russian products,” Jain said. The EU banned Russian imports following the invasion of Ukraine.

This year Russia has redirected its fuel oil exports towards Asia which has led to a decline in imports from Russia to Saudi Arabia compared with the previous year.

Middle East intra-regional trade, excluding Iran, has stepped in to meet demand –reaching record highs in July, according to Vortexa, another energy data company.

Saudi domestic consumption, combined with output cuts under Opec+ policy, has also led to reduced supplies to Southeast Asia, supporting benchmark prices in Singapore amid an overall fall in Middle Eastern exports.

In June Saudi Arabia’s crude exports hit their lowest levels in over a decade, dropping by 930,000 barrels per day to 5.42 million barrels.

“Confronted with lower nominations and higher domestic refining needs, Saudi Arabian oil exports saw a drastic month-on-month drop last month,” Kpler said.