Furnace oil glut forces PARCO to slash prices

KARACHI: Lower consumption of furnace oil by the power sector has led one of the domestic refineries to cut its price, while other refineries have also been taking measures to avoid piling up of inventories at their premises.

A day earlier, Pak Arab Refinery (PARCO) announced a reduction in the price of furnace oil by Rs10,000 tonnes to decrease it to Rs125,000 per tonne.

“The price cut by PARCO is an indication of the low lifting of furnace oil for power generation, which resulted in the refinery decreasing the price to make its price lucrative for sales,” sources in the oil industry told The News on Tuesday.

Low consumption was also evident from the sale number of fuel oil, with average per day consumption coming to stand at 2,910 tonnes per day, while the total consumption of furnace oil during the last week stood at 17,459 tonnes per day. “This was far below the normal consumption, which even registers 10,000 tonnes per day some times,” sources said.

According to the oil industry officials, while PARCO has decreased the price of furnace oil, Pakistan Refinery Limited (PRL) has imported crude oil, which produces less furnace oil. The reason PRL did so was to avoid piling up its stock at the refinery.

Sources said that presently the power generation from other sources like hydel and nuclear was on peak, which has resulted in low consumption of furnace oil by the power sector for now. During Q1FY23, lower generation was observed from hydel (4 percent on a YoY basis), RLNG (34 percent on a YoY basis), coal (23 percent on a YoY basis), and furnace oil (30 percent on a YoY basis).However, in the coming months of winter, power generation from hydel sources might decline, which could see some surge in furnace oil consumption by the sector.

It should be noted that during last winter, huge fuel oil stocks had built up at the premises of local refineries when the power sector lifted lower amounts of the fuel in December 2021.

During the month of September, furnace oil sales recorded 25 percent decline, whereas in the first three months of this fiscal, FO consumption was also down 23 percent. During the first quarter, power generation from fuel oil was down by 30 percent compared to the same period of last year.