Pakistan warns of hoarding as petrol stocks fall to 14-day cover

Pakistan's oil supply chain is on edge as petrol reserves have dwindled to just 14 days' worth, triggering urgent government action. The National Coordination and Management Council (NCMC), a civil-military body overseeing energy supplies, convened a meeting to address the situation. Minister for Economic Affairs Ahad Khan Cheema chairs the NCMC, with Lt Gen Zafar Iqbal as co-chairman of its executive committee.

The decline in stocks is attributed to a surge in petrol consumption over the past three weeks, following a significant price cut. Consumption in early July was up 18-20% year-on-year, while diesel demand rose about 40% compared to the five-year average for July. This increase suggests a reduction in smuggled fuel from Iran, likely due to a narrowing price gap.

Adding to the pressure, Pakistan State Oil (PSO) had two import cargoes canceled after failing to secure clearance from the NCMC amid falling global prices. Renewed tensions between the US and Iran have since sent import premiums soaring, with PSO's latest petrol cargoes attracting premiums around $25 per barrel, up from $12 just ten days prior. The current price differential incentivizes dealers and hoarders, with petrol and diesel becoming costlier by Rs10-12 and Rs40-42 per litre, respectively.

Smaller oil players are hesitant to increase supplies due to over Rs66 billion in pending price differential claims against the government and customs clearance challenges. While PSO remains the primary fuel supplier, local refineries can only meet about 9,000 tonnes of daily petrol demand, which stands at 25,000 tonnes. Diesel stocks are more stable at 21 days' cover, with local refineries supplying 16,000 tonnes of the 23,000-tonne daily demand.

The Oil Companies Advisory Council (OCAC) issued a stark warning about an impending supply chain crisis. During the NCMC meeting, OCAC representatives detailed the supply-side challenges they face, highlighting the critical need for government intervention to prevent further stock depletion and ensure market stability.

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the supply-side challenges highlighted by the representatives of the OCAC