Saudis May Have Drawn on Heavy Crude Inventories

Saudi Arabia may have used some of the heavy crude it has in storage to meet export requirements last month, according to an analyst based in the kingdom.

Demand for heavy crude rises in the Northern Hemisphere winter as it yields more fuel oil, said Sadad al-Husseini, who runs Husseini Energy, a consulting company he founded after retiring from Saudi Arabian Oil Co. Fuel oil is used in power generation in some Asian markets.

Saudi Arabia cut output in December to 9.025 million barrels a day, the lowest level in 19 months, a person with knowledge of the kingdom’s energy policy said yesterday. The kingdom exported 9.151 million barrels a day, drawing the extra oil from inventories, the official said.

Saudi Arabia prefers to store light crude grades in winter as demand for heavier crude rises, he said. If there is increased demand for heavy crude, Saudi Arabia responds by supplying from inventories instead of boosting output, he said.

“This stabilizes Saudi production levels more,” said al-Husseini, who is based in Dharan, Saudi Arabia. He was executive vice president of exploration and development at Saudi Aramco before leaving in 2004.

Before it's here, it's on the Bloomberg Terminal.