Refineries shun Russian crude as fuel oil prices dip

KARACHI: Local refineries are reluctant to import the Russian crude oil as the global prices of furnace oil, a by-product of the Russian oil, have plunged, industry sources told The News on Tuesday.

"We need the Russian crude oil at a discounted price because the price for the earlier cargo is not feasible in the present times when the furnace oil price has gone down in the international market," one source said.

Furnace oil prices have dropped to $60 per barrel from $80 per barrel in early December, making it unprofitable for Pakistan's hydro skimming refineries, which produce 55 percent of furnace oil from the Russian crude oil, compared to high speed diesel and petrol.

The local refineries have accumulated a huge stock of furnace oil, which they are trying to sell in the global market, because the domestic demand for the fuel has almost vanished. As the Russian crude oil produces more furnace oil, it won’t be feasible to import it by having a huge quantity of furnace oil to export it at low prices, industry officials said.

"The Russian crude oil is economically suitable for India where deep conversion refineries are extracting more diesel and petrol compared to fuel oil," another source said.

The sources said that the refineries have exported a large quantity of furnace oil in December to keep their operations running. Pakistan Refinery Limited (PRL) exported 35,000 tonnes of fuel oil, Cnergyico exported more than 70,000 tonnes and Pak Arab Refinery (PARCO) exported 100,000 tonnes of fuel oil so far this month, they said.

According to the data of sale in December, the sale of fuel oil was 34 percent lower than the same month last year and 33 percent lower than November this year. Pakistan and Russia signed a deal for the Russian crude oil supply to Pakistan at the beginning of this year, and the country placed its first order in April.

PRL imported its first cargo of 100,000 tonnes of the Russian crude oil in June. Cnergyico Refinery imported two shipments of the Russian crude oil totaling 110,000 tonnes in October and November. "We have no plan to import the Russian crude oil by March next year," a top official of PRL said when asked about its import.