Karachi, March 08, 2022 (PPI-OT): Pakistan Oil and Gas: Refinery margins – getting better end of the deal

Refinery margins for second half of Feb’22 stood at USD12.8/bbl for HSD against USD12.5/bbl for previous fifteen days where threat of Russia’s gas supply to Europe being discontinued loomed large, giving rise to expectations of a demand shit from gas to HSD.

MOGAS margins for last fifteen days of Feb’22 stand at USD11/bbl against USD9.3/bbl for previous fifteen where supply-demand imbalance is again at play with ongoing geopolitical tensions providing further impetus.

Moving forward, refinery margins are expected to remain elevated where increasing tensions are only going to uplift them further while countries across the globe prioritizing to secure local supply will further tighten the supply.

HSFO cracks can also be expected to improve after a long time if sanctions on Russia intensify with the risk of 1mn barrels per day of Russian HSFO supply going out of market. To note, HSFO margins continue to remain negative, standing at negative USD19/bbl for last fifteen days of Feb’22 against negative USD18.4/bbl for previous fifteen days.

Overall, local refiners can turn out to be one of the main beneficiaries of the ongoing geopolitical tensions and commodity super cycle where not only margins are expected to improve, but significant inventory gains can also be witnessed as oil prices continue to make new highs.