Saturday April 13, 2024

PSO ramps up diesel imports ahead of harvest season

By Tanveer Malik
March 21, 2024
Pakistan State Oil HQs can be seen in this picture. — PSO Website/File
Pakistan State Oil HQs can be seen in this picture. — PSO Website/File

KARACHI: Pakistan State Oil (PSO), the country's top oil marketing company, has placed substantial orders for diesel imports in anticipation of the agricultural harvesting season, industry officials said on Wednesday.

"PSO has ordered around 400,000 tonnes of diesel for March and April shipments" an industry official told The News. "The state-owned oil marketing company has placed these orders in view of the perceived high demand for diesel due to the harvesting season in March and April."

The breakdown includes 150,000 tonnes for the remainder of March and 250,000 tonnes for April. "The move is traditionally aligned with the expected surge in diesel demand during the harvest months," the official said.

However, sector analysts are raising concerns over these import volumes, suggesting a mismatch with the current market dynamics. Diesel demand has seen a significant downturn in the local market, casting doubt on the likelihood of a consumption rebound in the near future.

"Current consumption rates stand at approximately 13,000 tonnes per day, contrasted with a production of 14,000 tonnes from local refineries," another official said. "Historically, the demand would escalate to 25,000-26,000 tonnes daily during peak agricultural activity."

The official said this year's outlook appears bleak, with no marked improvement in diesel usage, even in Sindh where the harvest season has commenced. "The diesel consumption has mainly fallen due to its high price as well as a slowdown in the economy. The high price of diesel has pushed consumers to use smuggled Iranian diesel, which is cheaper and is being supplied from the neighbouring country."

Industry official said that PSO based its orders on previous year’s demand while placing the orders for more diesel, whereas on the other hand, diesel consumption has dropped sharply from the legal channel.

They said that the country is now facing a diesel glut, which has been adversely impacting the capacity of local refineries too. "The diesel production of refineries is not being consumed in the local market, which is resulting in the operation of the refineries at a lower capacity," they pointed out and added that this would also adversely impact petrol production at the local refining sector.

They said that March and April used to be the months with the highest diesel demand in the country, and now the situation has totally reversed as the demand has dropped to a historically low level after the economic slowdown as well as the high price of diesel in the country.