Karachi: Pakistan's Gross Refining Margins (GRMs) averaged $16.6 per barrel in October 2026, marking a 74% increase compared to the same period last year, while remaining relatively stable from the previous month. Despite this improvement, industry GRMs stayed below the $20 per barrel threshold for the second consecutive month, following higher margins observed between March and August 2026.

According to JS Global, the year-over-year improvement in GRMs was primarily attributed to stronger product spreads, especially in Motor Spirit (MS) and High-Speed Diesel (HSD). However, on a sequential basis, overall GRMs saw only a 1% increase, as HSD margins experienced a 13% decline due to a reduction in the HSD crack spread cap from $41.89 per barrel to $38 per barrel, effective October 20, 2026.

The GRM calculations include product supplier premiums and freight charges over and above product crack spreads, excluding impacts from HSD deemed duty, product differentials, and inventory movements. The 7.5% HSD deemed duty is estimated to impact GRMs by $2.9 per barrel.

Dubai crude oil, which is used for calculating GRMs, averaged $111 per barrel in October 2026, a significant increase from $65 per barrel the previous year. Spot premiums for Middle Eastern crude remained at $12 per barrel, but a combined crude premium and freight cost of $8 per barrel was assumed for calculations. The Fuel Oil (FO) spread was calculated using both local and international FO prices, with weightage assigned to local prices reflecting the proportion of domestic sales to total upliftment.

The government has shifted the burden of higher petrol import costs to refineries by implementing a Petroleum Levy surrender of Rs49 per litre ($28 per barrel) for 30 days starting October 31, 2026, which is expected to reduce industry GRMs in November 2026.