Diesel imports overshoot demand

Oil industry officials raise concerns, say no justification for allowing 120,000MT of imports

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ISLAMABAD:

The excess import of high-speed diesel (HSD) despite low demand for March is set to impact oil refineries, as the country already has stocks sufficient for over 34 days.

Sources told The Express Tribune that the Oil and Gas Regulatory Authority (OGRA) had allowed the import of 120,000 metric tonnes of HSD for March, despite the country having adequate stocks.

Oil industry officials say that for refineries, February was a tough month in terms of product demand and upliftment, and March is also looking unfavourable because prices are declining and demand is expected to remain low as all oil marketing companies (OMCs) will want to avoid inventory losses.

However, OGRA officials believe that the approaching agriculture season could lead to unexpected demand in March, and they want to be prepared. The oil industry also feels that OGRA has always preferred having excess fuel in the country rather than taking even the slightest risk of a fuel shortage, which may have influenced the decision to allow the import of high-speed diesel.

Sources say that refinery production in February was 401,000 metric tonnes, whereas the country's sales stood at 428,000 metric tonnes. The closing stock of high-speed diesel stood at 520,000 metric tonnes by the end of February. As far as stock sufficiency as of March 1 is concerned, at a sales rate of 428,000 metric tonnes per month, a stock of 520,000 metric tonnes meant the country was carrying more than 34 days of cover.

Oil industry officials say that domestic refineries are regularly producing over 400,000 metric tonnes of diesel per month, which is already close to meeting demand. While discussing the import of 120,000 metric tonnes of diesel in March, industry officials argue that stock levels were already comfortable, and with over a month's stock on hand and steady refinery production, there was no immediate risk of shortage. They further said that March is a low-demand month, as economic activity slows during Ramazan, meaning sales could be around 450,000 metric tonnes.

Allowing imports when refineries have sufficient output could force them to reduce throughput, leading to unnecessary outflows of foreign exchange. With the rupee already under pressure, importing petroleum products unnecessarily adds strain to foreign exchange reserves. Given the available stock, steady refinery production, and expected lower demand in March, oil industry officials say that there was no strong justification for allowing 120,000 metric tonnes of imports. The decision appears unnecessary from a supply security perspective and could negatively impact refinery utilisation and foreign exchange reserves. Authorities should take a more prudent approach to import approvals, prioritising local production to reduce external dependencies, oil industry officials say.