Pakistan’s petrol stocks were enough to last for three weeks and diesel for thirty days, whereas furnace oil was in abundance, which could help save $350 million/month on import bill, analysts said on Saturday. In view of the overall availability of oil stocks for 30 days, the government could cut its current energy import bill by 22 percent on monthly basis for the next three months, thus cumulatively saving $1 billion in next three months on import of petroleum products, according to sector analyst. “This is feasible at a time when international oil prices are likely to be on the lower side as predicted by various agencies amid Omicron (new Covid-19 variant) outbreak, which has created concerns on energy demand,” said Farhan Mahmood, Head of Research at Sherman Securities. Moreover, Mahmood added that rising concerns over imports were another factor as the government was finding avenues to reduce import bill. However, oil industry sources didn’t agree with reducing the import of petroleum products because these stocks are normal inventory to maintain demand-supply balance. Data suggests that around 1.5-1.8 million tons of stocks are available with local oil marketing companies (OMCs), enough for 30 days as combined consumption of petrol (MS), diesel (HSD) and furnace oil (FO) is around 1.7 million tons on a monthly basis.
“OMCs imported around 5.5 million tons of refined oil products during July-October 2021, expected to swell to around 6.9 million tons during July-November 2021, while local consumption is expected to be around 9.4 million tons during July-November 2021 (local production seen around 4.1 million tons),” said Mahmood as sector-wise import of goods was yet to be announced. It leaves the country with total oil product inventory of 1.5-1.8 million tons, as per estimates and the government may save $1 billion in three months. Pakistan total energy bill stood around $1.6 billion in October, which included $0.7 billion worth of petroleum imports that mainly consist of MS (motor spirit), HSD (high-speed diesel), and FO (furnace oil). According to Sherman Securities Mahmood, if the government maintained average 20-day inventory for next three months by curtailing 50 percent refined import in next three months, it can save $1bn. “This is based on average $75/bbl oil price while currently Arab light price is close to US$76/bbl.” The analyst believed it would reduce imports of refined products, which was positive for local OMCs and refineries. With oil prices expected to be on a lower side amid consensus on OPEC production increase and Omicron threat, there would be a lower risk of inventory losses for OMCs as any sharp decline in oil prices might compel them to book inventory losses. “Recent decline in oil prices and higher inventory position with OMCs may result in inventory losses in the second quarter FY22,” he said and added that this will be fruitful for local refineries as their production will improve. As per latest available data, refineries are operating at around 65 percent of their capacity at a time when refining margins have improved in last few months; however, a fall in production may dilute that impact, according to analysts.