Key Takeaways
- Petrol stocks have declined to a 14-day cover, prompting government action.
- The National Coordination and Management Council (NCMC) convened an urgent session with oil industry representatives.
- Consumption has risen due to price cuts, leading to concerns over potential hoarding.
Pakistan’s oil supply chain players are on high alert as petrol stocks have dropped to a 14-day cover, prompting the government to urgently address procedural issues and enforce measures to discourage hoarding. The decline in stock levels comes amid rising prices following renewed tensions between the US and Iran.
The National Coordination and Management Council (NCMC), a civil-military body on energy supplies, recently held an urgent session with oil industry representatives. Minister for Economic Affairs Ahad Khan Cheema is the chairman, while Lt Gen Zafar Iqbal serves as co-chairman of the NCMC’s executive committee.
Informed sources stated that petrol consumption has increased by almost 18-20 per cent year-on-year in the first half of July. Diesel demand was about 40 per cent higher than in July over the past five years, indicating a reduction in smuggled inflows from Iran due to the narrower price gap.
The cancellation of two Pakistan State Oil (PSO) planned import cargoes after they failed to secure clearance amid falling global prices also contributed to this. Subsequent tensions sent import premiums skyrocketing again, with PSO’s latest petrol cargoes attracting around $25 per barrel in premiums compared to $12 about 10 days ago.
As of Thursday, petrol and diesel were estimated to be costlier by around Rs10-12 and Rs40-42 per litre respectively. This has incentivized dealers to seek greater supplies from oil marketing companies and hoarders to profit from the situation. While PSO remains the country’s fuel lifeline, smaller players are reluctant to engage due to more than Rs66 billion in pending price differential claims against the government.
Oil companies have also complained of challenges in customs clearance. Diesel stocks now stand at a cover of around 21 days and local refining is keeping pace with requirements. Petrol consumption currently stands at around 25,000 tonnes per day against stocks of 345,000 tonnes, while local refineries can supply no more than 9,000 tonnes per day.
HSD (Heavy Diesel) stocks stand at around 465,000 tonnes against daily consumption of about 23,000 tonnes, with local refineries supplying around 16,000 tonnes per day. The Oil Companies Advisory Council (OCAC), an association of over three dozen refiners and OMCs, raised red flags by writing an urgent warning to the government about an ensuing supply chain challenge.
During the NCMC meeting, 'the supply-side challenges highlighted by the representatives of the OCAC were discussed and addressed,' an official statement said. The committee observed that concerns primarily stemmed from an abnormal increase in petroleum product sales during the first 15 days of July.
