Pakistan’s oil refiners set to export 185,000 mt of fuel oil in August

Pakistan's oil refineries have been granted authorization to export approximately 185,000 metric tons of fuel oil in August, ensuring sufficient strategic reserves to support the country's domestic power generation sector, according to notifications from the Oil and Gas Regulatory Authority (OGRA), as reported by Platts. The allocations include 50,000 metric tons for Pak-Arab Refinery Co., 45,000 metric tons for Cnergyico Pk.

Ltd., 40,000 metric tons for Pakistan Refinery Ltd., and 50,000 metric tons for National Refinery Ltd., all subject to maintaining strategic reserves adequate for the power sector's requirements, as per the notifications dated August 12, seen by Platts on August 19. In fiscal year 2025-26, Pakistan's oil refineries exported a total of 1.453 million metric tons of fuel oil, marking an increase from about 1.3 million mt in the previous year, as per data from the Oil Companies Advisory Council based in Karachi.

Similarly, the country exported 180,469 metric tons of low-sulfur fuel oil in fiscal year 2025-26, up from 137,880 mt in the preceding year, as indicated by OCAC data. The structural weakness of domestic demand for furnace oil has resulted in significant surpluses at older refineries, driving exports, according to industry sources.

These aging refineries generate furnace oil equivalent to about 21% of total refinery output in fiscal year 2025-26, leading to persistent surplus volumes that are often exported at discounted international prices, as reported by Arif Habib Ltd., a brokerage firm based in Karachi, according to Platts. This surplus volume has negatively impacted the profitability of refineries, especially as domestic policy measures have reduced furnace oil's competitiveness, further exacerbated by the LNG supply crunch hindering gas-fired power plants.

Consequently, fuel oil-fired power generation increased significantly in July as LNG supplies from Qatar were disrupted due to the ongoing conflict in the Middle East, with electricity generation from fuel oil-fired power plants nearly doubling year-over-year to 215 gigawatt-hours in July, up from 108 GWh in July 2025, as reported by Bazif Memon, a research analyst at Optimus Capital Management.

Despite a surge in fuel oil usage for power generation, refinery production still exceeds structural consumption, as observed by local market sources. The Asian high-sulfur fuel oil market remains buoyant due to persistent supply tightness resulting from prolonged uncertainty over Strait of Hormuz traffic, which has disrupted oil flows from the Middle East, pushing bunker premiums higher, according to trade sources.

Platts assessed the cash differential of the Singapore 380 CST High-Sulfur Fuel Oil (HSFO) cargo to the Mean of Platts Singapore 380 CST HSFO assessment at a premium of $33.39/mt as of August 19, its highest level since May 6, indicating robust market fundamentals. Despite a lack of arrivals from Pakistan in July and August, Singapore imported 92,459 metric tons of fuel oil from the country in June, as per Enterprise Singapore data compiled by Platts.

The Asian HSFO market is projected to become less tight as the summer power-generation demand season concludes, potentially alleviating some of the supply constraints over the coming weeks.