Refineries opt out Russian crude imports as furnace oil prices slide globally

Amid a global dip in furnace oil prices, local refineries in Pakistan are hesitating in importing Russian crude oil.

The News reported, quoting industry sources, that the decreased demand for furnace oil, a by-product of Russian oil, has rendered the current pricing of Russian crude impractical for Pakistan's hydro-skimming refineries.

One source highlighted the need for a discounted price on Russian crude oil, given the reduced feasibility in the current market where furnace oil prices have plummeted from $80 per barrel to $60 per barrel since early December.

Hydro skimming refineries in Pakistan primarily produce 55 percent of furnace oil from Russian crude oil, focusing on high-speed diesel and petrol.

Facing a surplus of furnace oil, local refineries are actively seeking opportunities to sell in the global market as domestic demand for the fuel has dwindled. Industry officials expressed concerns about the impracticality of importing Russian crude oil when there is already a substantial quantity of furnace oil available for export at lower prices.

Notably, the economic suitability of Russian crude oil for countries like India, with deep conversion refineries emphasizing diesel and petrol over fuel oil, was mentioned by another source.

In an effort to manage their surplus, refineries have exported significant quantities of furnace oil in December. Pakistan Refinery Limited (PRL) exported 35,000 tonnes, Cnergyico exported over 70,000 tonnes, and Pak Arab Refinery (PARCO) exported 100,000 tonnes of fuel oil in the current month, according to industry sources.

December sales data indicates a 34 percent decrease in fuel oil sales compared to the same month last year and a 33 percent drop from November this year. The deal between Pakistan and Russia for the supply of Russian crude oil was signed earlier this year, with the first order placed in April.

PRL, which imported its initial 100,000-tonne cargo of Russian crude oil in June, has no plans for further imports by March next year, according to a top official.

Cnergyico Refinery imported two shipments totaling 110,000 tonnes of Russian crude oil in October and November. The current market dynamics and furnace oil surplus contribute to the cautious approach of local refineries towards further Russian crude oil imports.