Saudi Arabia’s oil exports are set to jump this month as the twin impact of higher production and easing local demand from peak summer levels frees up supply, adding to concerns the market is headed for a surplus.
The amount of crude available for export will increase by about half a million barrels a day in September from the previous month, according to analytics firm Kpler. Supply is expected to increase further later this year and into 2026 as Saudi Arabia adds more output and starts a massive new natural gas project that will free oil for overseas sales.
The kingdom’s local demand for crude typically rises during the summer because of the need for air conditioning, but the elevated consumption has been key this year as it kept much of the production increases away from global markets. That cushion is now likely to fall away just as Riyadh and others in the OPEC+ alliance agreed to press on with output increases despite widespread forecasts for a surplus.
Saudi Arabia’s use of its crude oil to generate electricity rose in August to the highest since at least 2009 to more than 900,000 barrels a day, according to Kpler. That’s forecast to drop by a third in September and ease to below 400,000 barrels a day in October, according to the analytics firm.
At the same time, the kingdom’s production quota has been rising as it leads OPEC+ efforts to fast-track the return of previously halted output. The producers group is counting on sustained demand to support prices, but some of that may ease as strong summer consumption wanes.
“We expect global oil demand to have set a peak for the year in August, with temperatures in the Middle East slowly declining, and a peak in travel in the northern hemisphere,” said Giovanni Staunovo, an analyst with UBS Group AG. Crude use will “modestly decline over the coming months,” he said.
Market Forecasts
Crude in London was trading near $67 a barrel on Thursday, down about 10% this year. UBS Group AG sees prices dipping to $62 a barrel by the end of this year, while Goldman Sachs Group Inc. anticipates a drop to the low $50s next year. The International Energy Agency forecasts a record surplus in 2026.
Saudi Arabia, on the other hand, sees continued need for its crude, particularly in Asia, and has one of the most bullish outlooks for demand growth. Saudi Aramco’s Chief Executive Officer Amin Nasser said in August that he expects an 2 million barrels a day increase in the second half of this year compared with the first half.
Aramco is set to free up even more oil next year as it increases gas production. The start of the Jafurah project will offset about 35,000 barrels a day of crude use after initial output begins later this year and is set to replace as much as 350,000 barrels a day when at full capacity in 2030, according to Rystad Energy.
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