Pakistan’s refinery margins have surged to their highest level in nearly two years, driven by a global shortage of diesel that is lifting profits for local refiners despite a slump in crude oil prices.
Pakistan’s refinery margins have surged to their highest level in nearly two years, driven by a global shortage of diesel that is lifting profits for local refiners despite a slump in crude oil prices.
Gross Refining Margins, or GRMs, climbed to $13.3 per barrel this month, up from $4.5 per barrel in April – the lowest point in years. Refiners’ earnings move closely with GRMs, making the latest uptick a significant boost for the sector.
Pakistan last saw margins this strong in late 2023.
The country’s highest-ever GRM — $27 per barrel — was recorded in July 2022. Over the past five years, GRMs have averaged around $8 per barrel.
Diesel shortage drives global margin spike
The surge in margins comes even as the crude market remains bearish.
Analysts say an international diesel shortage is keeping product prices elevated, widening spreads for refiners worldwide.
A new round of U.S. and European Union sanctions on major Russian suppliers has squeezed diesel supplies, since Russian crude grades yield higher volumes of mid-distillates such as diesel and jet fuel. The restrictions have forced refiners to adjust their crude slates, creating temporary output disruptions and widening the demand-supply gap.
The shortage has hit as refineries across the Middle East and Europe carry out planned maintenance, further limiting production, while demand in Europe remains strong.
Diesel spread hits two-year high
The diesel crack spread — the difference between diesel and crude prices — has reached a two-year high of $29.5 per barrel. International diesel prices, including import duties, are hovering around $96 per barrel, compared to an average $66 per barrel for Arab Light crude this month.
Diesel prices are now the highest they have been since February 2025, when crude was trading near $81 per barrel. Despite crude prices falling significantly since then, diesel prices have remained largely unchanged.
Analysts say Pakistan Refinery Ltd. (PRL) and National Refinery Ltd. (NRL) stand to gain the most from the rise in diesel spreads.
Diesel accounts for 54% of NRL’s product output and roughly 50% of PRL’s production slate, giving both companies greater exposure to the high-margin environment.
Furnace oil remains a weak spot
Not all products are beneficial for the local refiners.
Furnace oil (FO) continues to drag margins, with demand inside Pakistan sharply reduced following the introduction of the carbon levy. Refineries have been diverting FO to export markets, where the product fetches steep discounts.
FO is trading at about $51.5 per barrel, a $16 discount to Arab Light crude. Exported FO may sell for another $1 to $2 per barrel below international rates due to freight and quality adjustments.
However, despite pressure from furnace oil, the current margin landscape could translate into a strong earnings cycle for the country’s major refineries if global diesel tightness persists, industry officials said
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