Petrol and Diesel Stay 15 to 20 Dollars a Barrel Above Pre War Levels, Widening Refining Margins

What the elevated fuel prices changed

Petroleum Minister Ali Pervaiz Malik told a parliamentary standing committee that international crude oil has returned to levels seen before the recent Middle East conflict, but the finished products Pakistan actually imports, petrol and high speed diesel, are still trading fifteen to twenty dollars a barrel above where they stood before the war. In plain terms, the gap between what a refiner pays for crude and what it can sell the finished fuel for, a gap traders call the crack spread, has stayed wide even though the underlying oil price has cooled off. The minister said this is why pump prices have not fallen back to pre war levels despite the government trimming the petroleum levy and carbon levy since February.

Why it matters for refining stocks

Pakistan's refiners buy crude at import parity, dollar linked prices, and sell refined products such as petrol, diesel and furnace oil at prices that track international product markets. When product prices hold up while crude softens, the margin a refiner earns on every barrel it processes widens. That margin is the single biggest swing factor in a refiner's quarterly profit, more so than the level of crude itself. A period of unusually wide cracks supports refining margins for as long as it lasts, even though it is a side effect of global market timing rather than anything specific to Pakistan.

Which stocks, and why

Attock Refinery, National Refinery and Pakistan Refinery all earn on the same mechanism, refining margins plus any inventory gains when crude moves. A sustained gap between crude and product prices supports their processing margins while it lasts. None of the three were named directly in the minister's briefing. This is a market wide condition that touches all three refiners in a similar way, which is why it reads as a sector story rather than a single company one. It does not change the picture for fuel retailers such as Pakistan State Oil in the same way, since a marketing company's per litre margin is fixed by the regulator and does not move automatically with the size of the crack spread.

What to watch

The minister's comments do not say how long this gap will last, and crack spreads of this kind usually narrow again once global refining supply catches up with demand. Readers should watch OGRA's monthly fuel price notifications and each refiner's quarterly results for gross refining margin numbers, along with any Petroleum Division commentary on whether levy relief will continue. A narrowing of the international product to crude gap would remove this tailwind about as quickly as it appeared.