Karachi, May 30, 2023 (PPI-OT): Pakistan Refinery - Near term profitability to remain strong!

Global prices of diesel and petrol have corrected significantly by ~46% and 50% since the start of the calendar year to presently stand at US$86/90 per bbl.

Naturally, domestic refinery margins have fallen sharply from their multi-year highs from US$26/45/bbl for MS/HSD back in June’22, to presently stand at US$-0.2/2.6/bbl (down 100%/94%).

Assuming Arabian gulf gasoline/gasoil prices increase by +10% from current levels, this is expected to raise domestic MS/HSD prices by PkR18/21 per litre, respectively.

Moving forward, sector profitability may remain firm in the near term as refined product margins are expected to remain strong during 2Q/3QFY23 alongside healthy inventory gains amidst increasing ex-refinery prices.

Overall, given strong retail margins, our preference stems towards ATRL majorly due to consistently higher white-product throughput and one of the lowest FO yields in the sector.