Local refineries’ gross refining margins declined 7% to $5.39 per barrel in October on a monthly basis.
Reduction in crude oil prices of 3% and decline in light distillates by 5% led to the decline, according to an Elixir Securities research note.
Among light distillates, petrol spread witnessed a noteworthy decline of 92% to $0.42 per barrel primarily due to cheap imports by Pakistan State Oil, says the note.
With 35% of its product slate comprising light distillates, Attock Refinery margins registered the highest decline of 14% to average at $4.84 per barrel. National Refinery’s margins declined 5% to $6.62 while Pakistan Refinery margins rose marginally to $2.52 per barrel during October.
Amongst middle distillates, expectation of high heating oil demand from the West during winter led to a limited decline of 1.4% in gasoil prices, despite demand from top buyers India and Indonesia. Gasoil spread widened by 4% to $13.38 per barrel.
Furthermore, furnace oil discount to crude oil witnessed a marginal improvement of $2.2 to $9.23 per barrel, due to tight supply condition on the back of lack of inflows from the West.
Published in The Express Tribune, November 3rd, 2011.
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NRL and PRL are guaranteed 15% after tax return on equity by the GOP regardless of the price of crude. Gross margins are not the issue, as inventory gains and losses occur monthly on mark to market basis. If refineries suffer a loss, that is made up by an ad-hoc payment by the GOP at the end of the year.