Karachi: In an effort to shield consumers from escalating refined product prices, the Government of Pakistan has set a cap on diesel crack spreads at $42 per barrel, excluding premiums such as freight and insurance charges. This move comes in response to the recent average diesel crack over crude oil, which stood at $65.03 per barrel over the past two weeks, with margins averaging $55.6 per barrel since July 2026.

According to JS Global, this regulatory mechanism is intended to last for a period of two months, although the government may reevaluate its position should geopolitical conditions improve and international market prices stabilize. A similar measure was previously enacted in April 2026, with the cap being lifted in May 2026 as pricing structures were revised and international refining margins normalized.

Despite the cap on margins, industry analysts believe that refineries are positioned to remain profitable, as the historical 10-year average for the diesel crack spread has been $15.8 per barrel. The current elevated gross refining margin (GRM) environment is expected to facilitate the financing of capital-intensive plant upgrades under the new refinery policy.

Projections for the first quarter of the fiscal year 2027 indicate that Pakistan Refinery Limited (PRL) and Attock Refinery Limited (ATRL) could report profits ranging from Rs8.0-10.0 billion and Rs10-15 billion, respectively. The earnings per share (EPS) for PRL and ATRL are estimated to be between Rs13-16 and Rs118-138, respectively, based on average spreads for HSD, motor spirit (MS), and furnace oil (FO) over the last 50 days. Notably, these calculations exclude any inventory gains or losses.

The premium for freight and insurance on HSD typically ranges between $5-8 per barrel, while for MS, it is $8-13 per barrel.