Margins of Pakistan’s oil refineries have climbed to their highest level in almost two years, despite a fall in international crude prices, as a global shortage of diesel continues to keep product spreads elevated.
According to a report by The Express Tribune, gross refining margins (GRMs), which had dropped to $4.5 per barrel in April 2025, have risen sharply to $13.3 per barrel in November. The new level is close to the sector’s strongest performance since July 2022, when margins peaked at $27 per barrel. The five-year average (2020–24) has remained around $8 per barrel.
Analysts say the improvement is a major boost for local refineries, whose earnings are directly tied to GRMs. They attribute the global strength in diesel to supply disruptions caused by US and EU sanctions on Russian oil suppliers. Russian crudes produce a higher share of mid-distillates, and the sanctions have forced refiners to switch feedstock, disrupting production flows and tightening diesel availability.
International diesel prices, including import duties, are currently around $96 per barrel, significantly above Arab Light crude at $66 per barrel. Diesel is now at its highest level since February 2025.
Furnace oil, however, continues to drag refinery performance, with negligible domestic demand after the carbon levy. It is trading at an average of $51.5 per barrel, a discount of $16 to Arab Light, and faces an additional $1–2 discount if exported.
Despite this, analysts believe Pakistan Refinery Ltd (PRL) and National Refinery Ltd (NRL) are relatively better placed because of their higher diesel output. Diesel accounts for 54% of NRL’s production and about 50% of PRL’s product slate.
The sector continues to face financial strain due to last year’s sales tax exemptions, which created losses of Rs34 billion for refineries and oil marketing companies. Although the government later allowed recovery of those losses, it has yet to implement the promised sales tax of up to 5%, a decision linked to IMF approval.
