Karachi, July 29, 2021 (PPI-OT): Pakistan Oil and Gas: Cracks depict a mixed trend

POL product cracks for 4QFY21 remained mixed – where for HSD, cracks declined to USD3.36/bbl despite underlying crude benchmarks inching higher (Arab Light during the period average at USD76/bbl up 11%QoQ) on the back of increasing demand amid tight supply.

RON92 cracks stood at USD4.39/bbl, increasing by 300.5/54.5% YoY/QoQ as individual activity across the major economies increase post improving vaccination rates. To note, average RON92 crack for 4QFY21 was well above 9MFY21 average of USD2.0/bbl.

HSFO cracks continue to operate in the red, standing at USD-12.0/bbl for 4QFY21 (vs. 9MFY21 avg. of USD-5.8/bbl) as again increased refinery run rates due to high gasoline demand resulted in oversupply while demand of the product continues to dwindle down.

Moving forward, even though supply remains tight, a decrease in demand as COVID-19 cases continue to increase cannot be ruled out in medium term however in immediate term, prices are expected to maintain their high ground. Impact on cracks is expected to be similar where a decline in demand can lead to decrease in gasoline cracks particularly however if refiners decrease their run rates, HSD cracks can witness an uplift due to decreased supply.