Karachi, December 10, 2021 (PPI-OT): Pakistan Oil and Gas: Crack spreads react to ‘Omicron’

Refining margins have slipped during last fifteen days of Nov’21 on the back of a new COVID-19 variant being detected in South Africa (Diesel/Gasoline cracks declined by 34/48% to USD5.9/6.2/bbl for last fifteen days of Nov’21 against USD9.0/12.0/bbl for initial fifteen days).

HSFO cracks, after improving during Sep’21-Oct’21 have slipped again after oil prices declined in recent weeks and averaged at negative USD16.5/bbl for last fifteen days of Nov’21. To note, HSFO cracks are at a low of almost two years.

With the advent of a new COVID-19 variant, refinery margins can be in for a volatile ride once again and initial signs in this regard are already visible where oil prices tumbled on the news of a new variant being detected however later, when it emerged that booster shots of vaccine can work against the variant, price recovered along with refinery margins internationally.

For local refiners, oil prices slipping and decrease in refinery margins can prove to be a double whammy however a bigger injury can occur from worsening HSFO cracks with 25-30% of the product slate belonging to the product.