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AKD Securities Limited – AKD Daily (May 19, 2022)

Karachi, May 19, 2022 (PPI-OT): Pakistan Refinery: Refinery margins continue to surge

Despite Arab Light remaining flat (USD112.98/bbl currently against USD112.82/bbl for last fifteen days), price of diesel and petrol surged by 1.5% and 4.5%, respectively due to continued increase in demand with supply struggling to catch up in the wake of Russia-Ukraine conflict majorly.

Local refiners are also reaping benefits of the aforementioned global supply crunch with cracks for diesel/petrol standing at USD38/15/bbl currently against USD36/9/bbl for last fifteen days, an increase of 5.6/58.3% compared to last fifteen days.

As per refinery offtake for Apr’22, weighted average margins for NRL/PRL/CNERGY/ATRL increased by 199%/166%/211%/227% on MoM basis and stood at USD21/18/19/15/bbl. NRL earned the highest margin in absolute terms while NRL witnessed the highest MoM increase among local refiners.

Moving forward, refinery profitability can be expected to remain elevated in near term as dual impact of high refinery yields and increasing oil prices resulting in inventory gains impart its effect. Moreover, recently some local refiners have moved towards lighter crude in order to improve yields of retails fuels and capitalize on higher cracks. We expect the same moving forward with local refiners working on improving yields of retail fuels and thus elevating profitability.