Furnace oil glut continues, stocks rise to 632,000 MT

Tanveer Malik
Tuesday, Mar 28, 2023

KARACHI: Furnace oil (FO) stocks have risen to 632,000 MT following refusal of power plants to stockpile the fuel and poor export feasibility due to its low price in the global market, The News learnt on Monday.

The fuel oil stocks have been accumulating since the start of last winter when power demand shrunk. Power plants are still not lifting furnace oil as electricity generation is mainly coming from hydel and nuclear sources, which have cut the demand of fuel oil for power generation.

On the other hand, the attempts by refineries to export furnace oil did not prove lucrative because of low price. Refineries determined it was financially unviable to export FO, as it could eat up their profits if the fuel was exported in the international market at a low price.

According to the sources in the oil sector, total 632,000 FO stocks include 539,080 MT of useable stocks and 93,147 MT of dead stocks.

Pakistan’s oil marketing companies (OMCS) currently hold 203,879 MT of furnace oil stocks, which is 32 percent of total stocks. The country’s power sector holds 202,280 MT of the fuel oil stocks with it, which is 33 percent, while local refineries have 220,068 MT, which is 35 percent of the total stocks.

The breakup of FO with the local refineries showed that PARCO holds 116,004 MT, National Refinery Limited (NRL) has 32,327 MT and Pakistan Refinery Limited 44,455 MT, Attock Refinery Limited 16,826 MT, and Cnergyico has 10,457 MT of FO stocks.

Sector people pointed out that the present FO stock is huge and is making the operations of local refineries vulnerable because it has been interrupting their operational capacity. They said that if the FO stocks were not lifting, it could further lead towards a shutdown of refineries’ operations.

On exporting the FO, industry people said that PARCO exported 60,000 MT and PRL exported 25,000 MT but the export price was not lucrative. The price in the global market is on the lower side and it can cause financial issues for the refineries if the stocks are exported at this price.

On the local front, the situation is not attractive for the local refineries as power generation from FO in the month of February slumped by eighty percent compared to the same month of last year and in the first eight months of the current fiscal. Electricity production from FO also decreased by fifty percent compared to the same period of the last financial year.