Petrol stocks reach record high

High prices, lower consumer demand lead to rapid increase in inventory

Zafar Bhutta December 08, 2021
Oil markets reacted little to the US weekly inventory data. PHOTO: FILE


Stocks of petrol have surged to historic levels that can meet 26 days of consumption demand in the country, which comes at a time when refineries have warned of imminent shutdown following refusal of power plants to procure furnace oil.

According to officials, at present the country has petrol stocks of 600,000 tons as demand has remained lower than forecasts.

Earlier, the oil industry had projected consumer demand for 800,000 tons of petrol in November but consumption stood far lower than the estimate.

Sources pointed out that high prices of petrol had hit the purchasing power of consumers and smog during winter also resulted in low consumption of the fuel.

“Petrol stocks have reached 26 days of requirement for the first time in Pakistan’s history,” remarked an official.

Sources put the current consumption of petrol at 21,000 to 22,000 per day in the country.

However, if refineries press ahead with their plant closure plans, a gas crisis may erupt in the current winter season.

A senior executive of a refinery told The Express Tribune that if the current situation persisted, the refineries would start shutting down in the next three to four days, which may hinder oil and gas supplies from fields across Pakistan.

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Attock Refinery Limited Chief Executive Officer Adil Khattak, in a letter sent to the director general oil, argued that there had been no improvement in supplies from the refinery.

“Furnace oil inventory has increased manifold and storage capacity has been left hardly for 8 to 10 days,” he said.

Khattak emphasised that the refinery had been left with no option but to curtail production owing to the lack of demand and they would be forced to close distillation units one by one, which would lead to the shutdown of the whole refinery.

He complained that huge volumes of furnace oil were being imported while the oil was not being purchased from domestic refineries. Independent power producers (IPPs) were not being pushed by regulatory authorities to procure furnace oil from the refineries, he regretted.

“At a time when refineries are heading towards shutdown, we have been asked on November 30 to increase production of kerosene oil as the country is left with only 10 days of stocks,” he said, arguing that the situation pointed towards lack of planning and coordination.

In another letter, Pakistan Refinery Limited CEO Zahid Mir said that the refinery’s furnace oil production stood at 7,109 tons in November 2021 whereas the total procurement was 5,875 tons.

Furthermore, PRL has produced 3,244 tons in December 2021 but the demand is zero.

Read Fuel prices unchanged despite drop in int’l oil prices

“PRL’s current fuel oil stocks are 7,112 tons  … given this situation and considering the current demand and production level, PRL can only operate for next 10 days if furnace oil procurement is not started,” it said.

He requested the Petroleum Division to urgently take up the matter and encourage the power sector to enhance consumption of furnace oil to curtail the inventory at the refineries.

“PRL currently has fuel oil ullage for just 10 days and if procurement issues are not resolved, PRL will have no other option but to shut down.”

He stressed that avoiding refinery shutdown was necessary for sustainable and uninterrupted supply of petroleum products, especially JP-1 and JP-8 along with supplies of high-speed diesel and motor spirit to oil marketing companies.

Published in The Express Tribune, December 8th, 2021.

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