Local refineries are facing a challenging dilemma due to a significant global dip in furnace oil prices, leading to their reluctance to import Russian crude oil.
The drastic decline in global furnace oil prices, dropping from $80 to $60 per barrel in early December as reported by a national daily, has rendered the previous pricing for Russian crude unsustainable for local hydro skimming refineries.
With a near-evaporation of domestic demand for furnace oil, these refineries find themselves burdened with a substantial surplus. This surplus, coupled with the high production of furnace oil from Russian crude, presents a barrier to importing Russian oil, making it an impractical option.
Read more:Why Pakistan Must Not Side with Ukraine over Russia
To mitigate the situation, December witnessed considerable exports of furnace oil by the refineries. Pakistan Refinery Limited (PRL) exported 35,000 tons, Cnergyico shipped over 70,000 tons, and Pak Arab Refinery (PARCO) exported a significant 100,000 tons.
Sales data for December paints a concerning picture, depicting a 34 percent decline in fuel oil sales compared to the same period last year, with a staggering 33 percent drop from November 2023.
Pakistan’s venture into an agreement with Russia earlier in the year for crude oil imports resulted in the first order placed in April. This initiative led to PRL procuring its initial cargo of 100,000 tons of Russian crude in June, followed by two shipments totaling 110,000 tons by Cnergyico Refinery in October and November.
The stark decline in furnace oil demand and the surplus stocks are posing challenges for local refineries, creating a complex situation amidst global oil price fluctuations.
