* Crude volumes used by local refineries at record high in Aug
* Saudi crude exports seen around 7 mln bpd till Dec- analysts
* Saudi fights for market share, exports to US decline (Adds details, analysts, background)
By Rania El Gamal
DUBAI, Oct 20 (Reuters) - Saudi crude exports fell in August for the fourth month in a row to their lowest levels in three years, official data showed on Monday, as the top oil exporter fights for market share amid weak demand and ample supplies from rival producers.
Saudi crude exports have been sliding in the past few months as shale oil squeezes Saudi oil out of U.S. markets and as demand in Asia, particularly in China, has been slower than expected.
The OPEC heavyweight exported 6.663 million barrels per day in August, down from 6.989 million bpd in July, according to data from the Joint Organisations Data Initiative (JODI).
The August export figures were the lowest since March 2011 and down from 7.795 million in August last year. They compared with 6.946 million bpd in June and 6.987 million bpd in May.
North America's shale boom has started to squeeze Saudi oil out of the U.S. market, the International Energy Agency said in a report last month, estimating Saudi exports would run below 7 million bpd for the last four months of the year.
U.S. imports of crude oil from Saudi Arabia averaged around 1.0-1.2 million bpd from May to August, compared with around 1.3-1.6 million bpd from mid-2013 through April 2014, analysis of data from the U.S. Energy Information Administration and Thomson Reuters Trade Flows shows.
Last week, Saudi officials briefed oil market participants in New York on the kingdom's shift in policy, making clear for the first time that the kingdom is prepared to tolerate a period of lower prices - perhaps as low as $80 a barrel - to retain market share, Reuters reported on Monday.
It has already cut selling prices for its crude to hold on to Asian customers.
A large volume of Saudi oil output went to the domestic market in August due to the seasonal burning of crude to generate power for air-conditioning in the hot summer months, and as the kingdom launches two refineries to add 800,000 barrels per day (bpd) in combined capacity to process crude.
Saudi refiners processed 2.167 million bpd of crude in August, up from 1.915 million bpd in July and 1.551 million in August 2013, according to the JODI data. Crude volumes used by domestic refineries in August were the highest since at least January 2002, the start of JODI's records.
Meanwhile, Saudi oil use for power generation was 769,000 bpd in August, down from 899,000 in July and little changed from a year ago.
Industry sources in Saudi Arabia say domestic consumption has no relation to exports, given the kingdom's significant spare capacity.
Riyadh can easily ramp up production, running at around 9.6 million bpd in August, or draw on storage to cover any surge in domestic demand and keep its exports steady.
But that could leave it in the long run with less than the 1.5 million to 2 million bpd of spare capacity it would like to retain in case of any unexpected global supply shortage, as risk remains high in the complex politics of the Middle East.
Lower crude burning may free up some Saudi crude oil for exports in coming months, analysts say.
But a 400,000 bpd refinery in Jubail, known as SATORP, reached full capacity in the middle of 2014, and another 400,000 bpd refinery in Yanbu started trial runs last month.
"Lower demand for direct burn in the fourth quarter versus August allows for higher exports currently than in August, but structurally the increase of refinery runs in Saudi Arabia is a new challenge to its role of swing producer," said Olivier Jakob, oil analyst at Petromatrix in Switzerland.
Saudi Arabia is likely to keep its oil output steady throughout the rest of the year, an industry source told Reuters.
Industry observers estimate that monthly Saudi exports will amount to around 6.9 million to 7.1 million bpd until December.
"Once the peak summer demand is over for power, there will be some changes in Saudi production which have nothing to do with exports," said Sadad al-Husseini, a former Aramco executive, referring to output adjustments related to domestic demand.
"I think they will try to stay at around 7 million bpd in exports." (editing by Susan Thomas and Jane Baird)