Fuel oil imports dropped to less than 400,000 tons in October, the lowest volume in six months, as transport problems due to heavy flooding hit demand, official data showed on Monday.
The country’s main buyer, Pakistan State Oil, also bought the lowest volume at 780,000 tons for its usual three-month cycle, just about a month ago.
However, the lower demand is seen as a near-term issue, caused by immediate transport problems, and is expected to pick up by the next tender cycle, as the country has not been generating enough electricity to meet domestic needs.
“The lower demand is a result of surplus supplies from the previous tender cycle, when it bought nearly 1.5 million tons, which was a result of heavy flooding in the third quarter,” a Middle East-based trader said.
“The floods basically disrupted the land transport system and there were a lot of difficulties in moving oil from the ports in the south to power plants in the north. Plus, the heavier rains also resulted in more hydropower generation.”
Despite the lower imports, traders expect import volumes to return to average levels at about 600,000 tons per month by the next tender cycle.
They said the country’s electricity infrastructure is still not generating enough power to meet the consumption needs of its growing population, of around 18,000 megawatts, resulting in frequent blackouts of more than 10 hours a day for weeks at a stretch.
Despite the six-month low import volumes, the monthly average volume, at about 605,000 tons, is still its highest on record, up nearly 10 per cent from last year’s average of about 550,000 tons, data shows.
The October import volumes, at about 382,500 tons, comprised more than 80 per cent of high-sulphur cargoes and the rest are low-sulphur lots, down about 45 per cent from month-ago volumes.
In line with the lower demand, the largest oil marketing company PSO bought 12 high-sulphur fuel oil cargoes of 65,000 tons each for November to January delivery, its lowest purchase volume since buying January to March parcels at the end of last year.
It is also seeking three LSFO cargoes of 60,000 tons each, for December to January delivery via tender, which closes on December 5. Most of the country’s requirements are supplied by traders based in the Middle East, due to freight advantages resulting from their proximity to the country, versus East Asian players.
Traders said Pakistan’s buying could also have been curbed by a very strong fuel oil market, particularly in East Asia, over the past two to three months, which has seen cash differentials soaring to record-high double-digit premiums.
Published in The Express Tribune, November 22nd, 2011.
COMMENTS (1)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
There can be no growth in any economy unless it has an assured supply of power. This is axiomatic. News reports of seminar's being held about how Pakistan can stimulate growth are a waste of time, energy and money.
Someone should caclulate how much we have lost in terms of output, employment and exports ever since we have faced a power crisis about four years ago. If anything, it is worse now than it was before as demand out-strips supply by a progressively wider margin
I would guess that the loss to the economy is simply staggering.