Karachi, June 15, 2022 (PPI-OT): Pakistan OMCs: GRMs remain upbeat, Petrol Subsidy not done yet

Relatively low refinery production globally (~2mn bbl/d less compared to pre-COVID) and increasing seasonal demand for gasoline moving into the summer have once again sent the refinery margins on the uptrend.

Even after sharply increasing fuel prices in the previous two petrol price revisions, the authorities have a predicament on their hands once again, due to rising crude and refined product prices globally. Assuming unchanged retail prices, subsidy for Mogas/HSD works out to be ~PkR18/45 for the next fortnight, up 100/95% respectively.

The PDL collection target for the FY23 is set out to be PkR750bn, up 23%YoY from last years initial estimate. Achieving the desired volumetric targets to ensure collection may be another thing, as there may be slowdowns on the back of (1) higher base effect (2) expected demand pullbacks due to risen fuel prices and (3) lower forecasted GDP growth and crushing budgetary stance for car assemblers/sellers in recent Fed Budget’23.

Moving forward, refinery profitability is expected to remain elevated in near term as they reap the dual impact of higher refinery yields and increased oil prices. Given high margins, our liking stems towards ATRL majorly due to consistently higher white-product throughput and one of the lowest FO yields (-ve margins) in the sector.