New York/Riyadh : Saudi Arabia, the world's largest crude exporter, may boost global demand for oil in summer as it is forced to burn liquid fuels to generate electricity, JPMorgan Chase & Co. said.

"If Saudi Arabia keeps up with a recent trend of burning crude to support peak power generation, summer seasonality in global oil markets could become even more marked — and bullish — in the coming years," Lawrence Eagles, a New York-based analyst for the US bank, said.

Peak crude demand in Saudi Arabia could reach 900,000-1.2 million barrels a day in the summer of 2012 as generators burn more crude to make up for slower growth in gas output, JPMorgan said.

Gas oil, fuel oil and the direct burning of crude in power plants accounted for 45 per cent of utility fuel based on 2007 annual data, according to the report dated February 11.

Saudi generators may burn 140,000 barrels a day more crude from now until 2012, and in an "aggressive" scenario the call on crude may more than double to 300,000 barrels a day, it said.

"There has been an increase in crude burning at the expense of fuel oil over the past year," Eagles said.

Fuel oil demand has dropped by 85,000 barrels a day while implied crude burning has increased by more than 200,000 barrels a day, he said.

Saudi Arabian Oil Co. is developing two gas projects at Karan and Arabiyah, which may add an additional 3.6 billion cubic feet of gas a day by 2015, JPMorgan said.

The projects may cost as much as $5 per million British thermal units to develop compared with $0.75 per million Btu charged to domestic users.

Uncertain state

"With gas growth uncertain over the next few years and a stated policy that petrochemicals get first priority for gas supplies, at least over the next three years it appears that the Kingdom's power generation will require an increasing amount of oil," Eagles said.

There's a moratorium on new natural gas-fired power plants and shortages have crimped petrochemical projects.

Crude oil may rise this week as cold US weather bolsters heating-oil consumption and reduces stockpiles of the fuel, a Bloomberg News survey showed.

Crude oil for March delivery fell 0.7 per cent to $74.75 a barrel on the New York Mercantile Exchange at 4.41pm Singapore time.

The International Energy Agency has raised its forecast for global oil demand this year by 170,000 barrels a day to 86.5 million barrels a day, or 1.8 per cent, from 2009 levels, it said.