KARACHI – The surge in the international oil prices has improved the domestic refinery operating environment by augmenting their Gross Refinery Margins (GRMs), market analysts said on Thursday. The GRMs is a vital gauge for the profitability of oil refinery sector.
The analysts opined that gross margins for the refineries in the local market were all set to respond positively to $2.6 per barrel during this month as compared to -$0.4 per barrel in the preceding month.
“According to our estimates, (this boom is) on account of the favorable price movement,” analysts at a brokerage house, Topline Research stressed. They noted that the improvement, however, stemmed from a surge in the deemed duty in absolute terms on gasoil and diesel.
The above ‘favorable price movement’, Topline’s researchers have estimated, would see individual refineries such as Attock Refinery Limited (ATRL), continuing to lead the pack on account of its superior product mix (higher share of diesel and petrol). Assuming crude oil prices remain unchanged, analysts estimate ATRL’s gross margins will exhibit a significant improvement to stand around $6.1 per barrel this month against $4.8 per barrel in the previous month.
“Other listed refineries are expected to pull back their core-refinery margins into green,” the analysts said. They forecast that National Refinery’s (NRL) margins are expected to stand at $0.9 per barrel as against last month’s -$2.6 per barrel. The profits of Pakistan Refinery (PRL) and Byco Petroleum have been anticipated to stand at $0.2 and $1.6 per barrel.
“However, it is important to note that these GRMs stems from the advantage of deemed duty otherwise most of the refineries would have been in losses as depicted by the graph below,” the market observers warned.
Furthermore, analysts underlined that the popular uprising in the Middle East and North African (MENA) region along with devastating tsunami in Japan had pushed the international crude oil prices (Arab Light) up by 10 percent in monthly terms to an average of around $113 per barrel last month.
“This has also translated into surge in middle distillate prices in the range of seven percent (HSFO) to 12 percent (Gasoil),” they added. Additionally it was noted that middle distillate crack spreads (crude price less product price) had improved on premium products in the range of 16 percent (Kero) to 20 percent (Gasoil), while spreads on inferior HSFO had dipped further dipped by 17 percent.
Oil price hike augurs well for local refineries
