Pakistan's state-owned marketer PSO has returned to the spot market seeking fuel oil for the first time since April 2019, after receiving government approval to import the oil product to meet peak summer demand for power generation.
PSO has issued a spot tender seeking to import two 65,000t cargoes of high-sulphur fuel oil (HSFO) for 9-18 July delivery. This tender will close on 29 June. The oil marketing firm is seeking HSFO with a maximum viscosity of 180cst and maximum sulphur content of 3.5pc.
Pakistan's cabinet committee on energy (CCoE) has asked PSO to import HSFO to supply to K-Electric — a domestic utility in Karachi city — to cope with the seasonal rise in power demand, said traders. Electricity consumption rises during Karachi's summer months, as temperatures that typically exceed 30°C prompt more air-conditioning use.
K-Electric's daily furnace oil requirements have risen during the warmer months because of a shortage of the liquid fuel in the country, with this being one of the main reasons for intermittent power outages in Karachi, traders said.
Pakistani refiners had reduced throughputs in March, with some even forced to shut down, because of lower transport fuel demand as a result of the Covid-19 outbreak. Refiners are also less inclined to maximise operating rates so that HSFO inventories can be brought down, as demand for the oil product from utilities has fallen drastically since the country imposed a ban on importing high-sulphur furnace oil for power generation use in January 2018.
Low run rates at refineries could have curbed HSFO production before the summer period, as refiners preferred to keep supplies to a minimum to prevent storage tanks from filling up, traders said. But this eventually led to a tightening of domestic fuel supplies for power generation during the summer months.
PSO was also in the market last summer seeking to import HSFO for delivery during May-June 2019. The CCoE had then asked PSO to increase its fuel oil inventories ahead of the Islamic fasting month of Ramadan, which began in early May last year, to prevent load-shedding and guarantee power supplies.
