Pakistan buys oil due to depleting stocks, surging demand

Below-average rains boost demand for diesel to bridge energy deficit.

SINGAPORE: Pakistan State Oil (PSO) bought 55,000 tons of gasoil – a petroleum distillate (such as diesel) used for generation of thermal energy or generation of power when used in engines – for loading this week after its term supplier delayed a cargo to the company, at a time when domestic fuel oil stocks are low and demand has increased, industry sources said on Monday.

Pakistan bought one of two diesel cargoes that it had initially sought, for loading over August 28-30, from trader Vitol at a premium of about $5.95 a barrel above Middle East quotes, one of the sources said.

The company had initially requested two cargoes as its long-standing term supplier Kuwait Petroleum Corp (KPC) had rescheduled a late-August cargo to October.

“As Pakistan diesel stocks are very low, (PSO) asked for two cargoes just to be on the safe side,” the source added.

Problems at a desulphuriser unit at one of KPC’s refineries could likely have caused the term cargo to be delayed, industry sources said.

But this could not be confirmed. KPC officials could not immediately be reached for comment.

KPC is expected to resume normal term supply of oil to Pakistan in early September.

PSO is contracted to buy around 3 million tons of fuel oil from KPC this year.

In May, KPC had to delay some cargoes to Pakistan due to rising domestic demand ahead of peak summer demand and problems in secondary refinery units.

It is unclear if the two refinery issues are related.

The delay comes at a time when below-average rains have curbed hydropower generation in Pakistan, boosting agricultural demand for diesel to power irrigation systems.

PSO is separately seeking 305,000 tons of oil for delivery over September to December, making its spot requirements for gasoil largest in more than a year.

Pakistan needs to buy oil due to the non-availability of hydropower and a gas shortage faced by power plants, industry sources have said.

Published in The Express Tribune, August 28^th, 2012.