Refining margins fall 12% to $3.89 per barrel

Naphtha defies the trend, improves on demand from Korea amid tight supply.

KARACHI: Refining margins fell by 12% to $3.89 per barrel during December on a monthly basis, in line with drop in Arab light prices.

Refined product prices are determined on the preceding month’s average prices of Arab Gulf region, hence December margins determine January 2012 profitably for local refiners, according to an Elixir Securities research note.

After a roller coaster ride, crude oil prices averaged $108.18 per barrel in December, 2% lower on a monthly basis.

High speed diesel, kerosene oil, gasoil and petrol fell 3%, 4%,3% and 1% on a monthly basis, respectively.

Naphtha was the only product which witnessed improvement of 2% owing to higher demand from Korea amid tight supply, adds the note.

Naphtha spread improved by $4.6 per barrel but still remained negative at $-10.75 per barrel.

Expensive import by Pakistan State Oil helped petrol spread improve by $1.02 per barrel to $-3.68 per barrel.

Refinery-wise, Attock Refinery remained the key beneficiary of improvement in naphtha and petrol spread with GRMs trimming only by 10% to $0.36 per barrel from the previous month, says the note.

High exposure to high speed diesel trimmed National Refinery’s margins by 8% or $0.48 per barrel whereas Pakistan Refinery declined 33% reduction in GRM to $1.08 per barrel on a monthly basis.

Published in The Express Tribune, January 4^th, 2012.