Oil sector warns of refinery disruptions

KARACHI: The oil industry has warned of potential disruptions in refinery operations due to a significant buildup of high-speed diesel (HSD) stocks.

As of Tuesday, HSD stocks have exceeded 660,000 metric tonnes, while daily sales hover around 16,000 metric tonnes. “Two vessels from Pakistan State Oil (PSO) and Go, carrying an additional 90,000 metric tonnes of HSD, will further increase these stocks in the next two to three days,” industry sources stated. Refineries, they noted, are struggling to maintain sustainable operations despite having high-capacity storage facilities.

For several months, the oil sector has been urging relevant authorities to address the issue of diesel smuggling from neighbouring countries and its distribution to Sindh and northern regions. However, these efforts have yet to produce any results.

Speculative pricing news ahead of the bi-weekly price reviews affects HSD sales. When a price decrease is anticipated, dealers often reduce or halt their purchases from oil marketing companies (OMCs), which in turn leads to reduced lifting from refineries. This situation has led to issues of smuggling and price speculation impacting HSD.

In response, the oil sector has called for a revision of the current pricing mechanism. They argue that the existing system, which is based on a 15-day average price, should be updated to a weekly basis. This change would help mitigate extreme fluctuations in HSD sales, especially during slower sales periods. Industry insiders also believe that deregulation of petroleum prices, while not imminent, could potentially improve the situation.

The Oil & Gas Regulatory Authority (Ogra) has also been approached to allow the maintenance of 20 days’ worth of HSD stocks, with hopes that a favourable decision will be issued soon.