Gulf disruptions, surging costs worry oil industry

According to The Express Tribune, Pakistan's oil sector is worried about the supply and cost of crude and refined products as Middle Eastern prices surge. Refiners and oil marketing companies say repeated tweaks to the home pricing formula have made buying supplies on sound commercial terms harder. Officials warn that dampening the effect of global prices through formula adjustments, rather than cutting taxes and levies, could deter imports and create product shortages.

Ogra's revised formula builds HSD prices from a rolling seven-working-day mean of Platts Cash Dubai, plus the HSD spread and an OSP gap for Saudi Extra Light. On September 9, Dubai Mo01 was quoted at $122.01 a barrel, a rise of 11.21%. The Murban-over-Dubai differential, which reflects the premium rather than Murban's outright price, stood at $26.24 per barrel, rising 9.61%.

Companies must book cargoes well ahead, open Letters of Credit and tie up large working capital, yet frequent formula changes leave them unsure whether costs will be recognised. Higher freight, insurance and financing costs also push up the landed price of imports, and an industry official warned that any domestic refinery shortfall would have to be met through imports of diesel and petrol. Suppliers are reportedly pricing in regional risk, which could push Pakistani importers into competition for limited cargoes at higher premiums.