(oilprice.com) Crude oil prices hit a 10-week low on Tuesday, but one piece of data from Saudi Arabia could provide a glimmer of hope for those longing for an oil price rally. Saudi Arabia is burning through some of its oil inventories as exports combined with scorching domestic demand exceed its total production. In 2015, Saudi Arabia built up crude storage levels to a record high, as the kingdom stepped up production in the face of a global supply surplus. As other producers have cut back on production, there is more room for Saudi and OPEC to export. At the same time, domestic demand is rising quickly in Saudi Arabia.
In order to meet that demand and also pursue greater market share, Saudi Arabia has had to draw on its oil sitting in storage. That led the sharp monthly gains in inventories to flip into a deficit late last year. From October 2015 to May 2016, Saudi crude inventories dropped 12 percent to 289 million barrels, according to The Wall Street Journal , the longest period of decline in 15 years.
But part of the reason that domestic demand is so strong is seasonal. Saudi Arabia’s oil consumption spikes in the summer because it uses a substantial volume of crude for electricity, and with all the air conditioners running full blast in the hot summer months, more oil is needed. In 2015, the country used 25 percent of its oil production domestically.