Pakistan may presumably witness gasoline shortages within the close to future as a number of oil importing firms face hurdles in securing {dollars} wanted to shut import offers, at a time when the South Asian nation’s overseas change reserves have dwindled to the bottom stage in virtually 9 years.
Sources informed S&P World Commodity Insights that the Oil Firms Advisory Council, members of refineries and oil advertising and marketing firms had written to the nation’s finance ministry about oil importers going through challenges in opening letters of credit score for the import of petroleum merchandise. It may take as much as six to eight weeks for import operations to normalize, sources added.
“If L/Cs should not established on a well timed foundation, vital imports of petroleum merchandise can be impacted, which can result in a gasoline scarcity within the nation, additional deteriorating the demand,” stated Sumit Ritolia, a refinery economics analyst at S&P World.
“The extended unavailability of import contracts and L/Cs can be sending damaging alerts to worldwide oil suppliers, resulting in excessive costs for imports and even it might result in the compelled cancellation of oil cargoes,” he stated.
Power-deficit Pakistan imports roughly 430,000 mt of motor gasoline, 200,000 mt diesel and 650,000 mt crude oil at a price of $1.3 billion/month, in accordance with the letter from the oil trade to the finance minister.
The banking hurdles already triggered delays within the arrival schedule of a number of cargoes in addition to led to the cancellation of some cargoes, the letter stated, including that the state of affairs has severely deteriorated throughout January.
“If L/Cs should not established on a well timed foundation vital imports of petroleum merchandise could be impacted,” it stated.
Hurdles mount
Attock Petroleum Ltd., the nation’s second-largest retailer of petroleum merchandise, in addition to Pakistan Refinery and Hascol Petroleum, have written letters to the Oil Firms Advisory Council and the nation’s central financial institution about some banks refusing to honor import paperwork.
“Native banks have sadly regretted to determine our oil import L/Cs on the plea that the State Financial institution of Pakistan has instructed to do rationing on their L/Cs institution primarily based on their overseas reserves state of affairs,” stated the letter from an oil advertising and marketing firm.
Pakistan’s central financial institution reserves have dwindled to $4.3 billion, in accordance with the State Financial institution. The reserves reached a low of almost eight years and 11 months, sufficient to cowl imports for less than three and half weeks.
The greenback shot as much as its strongest stage towards Pakistani rupee at 240.1 on July 29, 2022, and the change price was final quoted at 228.2 Jan. 16, information from the State Financial institution of Pakistan confirmed.
“Reserves are down due to steady principal and debt funds on overseas loans and drying up of exterior inflows from bilateral and multilateral sources,” stated an analyst.
Pakistan’s ministry of power and the Oil and Gasoline Regulatory Authority in a separate letter to the central financial institution stated consideration had been drawn towards insufficiency of credit score strains and reluctance of banks to open L/Cs for oil imports as a consequence of varied apprehensions.
They’ve requested the State Financial institution to urgently intervene and ask the banks to assist open L/Cs for imports of fuels, together with lubricants, to avert any danger of gasoline shortages within the nation, the letter added.
Pakistan’s potential home gasoline provide crunch carefully resembles Southeast Asia’s battle to acquire enough provides of center distillate merchandise throughout second-half 2022.
The greenback strengthened sharply towards a number of Southeast Asian currencies, together with Vietnamese dong and Indonesian rupiah within the fourth-quarter 2022. Many small-scale buying and selling firms within the area struggled to finance {dollars} from native banks to conduct their import and distribution companies, S&P World Commodity Insights reported beforehand.
Slowing gross sales
Pakistan’s motor gasoline gross sales in December fell 11% yr on yr to 620,000 mt, diesel consumption decreased 15% to 520,000 mt and gasoline oil fell by 3% to 120,000 mt, in accordance with information from the Oil Firms Advisory Council.
Within the six months ended Dec. 31, 2022, gross sales of motor gasoline declined 15% yr on yr to three.83 million mt, in contrast with 4.51 million mt throughout the identical interval a yr earlier. Diesel gross sales dropped 23% to three.36 million mt and gasoline oil fell 24% to 1.45 million mt, the info confirmed.
Tahir Abbas, head of analysis at brokerage Arif Habib, stated the nation was witnessing a slowdown in financial exercise amid weak industrial output, resulting in a decline in general consumption. Larger petroleum merchandise costs, a decline in automotive gross sales and decrease demand from gasoline oil-fired energy crops had squeezed general merchandise gross sales, Abbas added.
Supply: Platts