In May, Pakistan exported a record-high 90,000 tonnes of fuel oil.

In May, Pakistan exported a record-high 90,000 tonnes of fuel oil.

KARACHI: According to industry insiders quoted by The News on Thursday, Pakistan shipped 90,000 tonnes of fuel oil in May 2023 to reduce a massive stock that had grown over the previous few months despite little domestic demand.

An economic slowdown and cold/moderate weather, particularly in the central and northern parts of the country, have contributed to a lack of growth in fuel oil consumption, which is why sources estimate that fuel oil exports reached 250,000 tonnes in the last three months (March to May). They predict that there will be an increase in exports in the coming days. Pakistan now maintains a stock of more than 510,000 tonnes of fuel oil, which is kept by local refineries, power plants, and oil marketing organisations (OMCs). Around 40% of the nation’s stock, or 200,000 tonnes, is held by power plants, followed by OMCs with 180,000 tonnes, and refiners hold the remaining stock.

In the month of May 2023, Pakistan Refinery Limited (PRL) exported 40,000 tonnes of fuel oil while Pak Arab Refinery Limited (PARCO) shipped 50,000 tonnes, according to sources in the oil industry.According to the sources, refineries have been exporting fuel oil to keep the operations of their plants operating smoothly, and they have been doing so even at a price that is lower than the local fuel oil price.

They emphasised the Rs35,000 per tonne disparity between the local and international prices of fuel oil. However, refineries have been shipping their stockpiles to ensure the seamless operation of their operations, which would have been negatively impacted otherwise.

According to the sources, of all the refineries, PARCO and PRL had the largest stock of fuel oil, and they chose to export it since they had given up on improving local fuel consumption in the near future.They claimed that despite a significant drop in fuel oil power generation in April compared to the same month last year, the domestic market conditions for neighbourhood refineries continued to be unfavourable. Fuel oil was used less frequently to generate power during the first 10 months of the current fiscal year, a decline of more than 60%. According to the sources, Pakistan was importing fuel oil to meet local demand during the same time period of the previous financial year, making the current fiscal year’s fuel oil exports significant.

Due to the SBP action, the dollar falls by Rs15 in open trade.

Due to the SBP action, the dollar falls by Rs15 in open trade.

KARACHI: The State Bank of Pakistan’s (SBP) decision to permit banks to buy dollars from the interbank market for the settlement of card-based cross-border transactions caused the US dollar to drop as much as Rs15 on the open market on Thursday.

When compared to the Rs311-318 traded a day earlier, the open market started with low dollar pricing and traded as low as Rs298. Beginning in May 2006, card-based transactions using the International Payment System (IPS) were settled by purchasing dollars from exchange businesses.

The SBP made this crucial choice to meet one of the requirements outlined by the IMF for coming to a staff-level agreement for unlocking the stuck-up tranche: to minimise the increasing disparity in dollar rates between open and interbank markets. The dollar’s open market closing price was quoted by the Exchange Companies Association of Pakistan (ECAP) at Rs299 and by the Forex Association at Rs298.

The dollar dropped Rs12 or Rs13 at the reported closing rate on Wednesday of Rs311.

$102 million less in central bank reserves

However, according to currency specialists, dollar exchange rates were significantly higher than those stated by the exchange providers. Before the SBP decision, the dollar was traded on Wednesday between Rs318 and Rs320.

negative results

Although the State Bank’s action was successful in lowering open market dollar rates, there is still a differential of up to Rs13 per dollar. Currency specialists predicted that this discrepancy would benefit bank clients, who may now purchase dollars at lower prices.

This might make it possible for credit card owners to send money abroad. But it would cause further harm to a nation already struggling with a dollar shortage and mounting debt service costs.

“Illegal currency operators might use a cheaper dollar for their payments. They can purchase dollars on the interbank market for Rs285, which is six to nine percent less expensive than the going rates on the open market. Money will leave the country as a result, according to Malik Bostan, chairman of the ECAP.

He proposed levying a 10% tax on luxury goods purchased with credit cards outside of the country. He claimed that the State Bank’s and the government’s efforts to conserve money would be completely destroyed by the settlement of payments by unlawful operators through credit cards and shopping for opulent goods.

A reward for the wealthy

However, some prominent bankers and currency merchants opposed the central bank’s choice.

A senior banker declared, “The choice has been made for the rich who will now enjoy summer vacations in Europe and the United States with cheaper dollars.

According to a Wednesday circular from the State Bank, these directives are effective immediately and last through July 31.

Although there is no official information available regarding the number of travellers, he said that hundreds of thousands of Pakistanis travel during the summer holidays with their families. Concerning the timing of the State Bank’s decision, the banker voiced his reservations.

“There is no doubt that this move will result in larger dollar outflows. The banker predicted that this would only make things worse for the nation’s impoverished.

Every week, banks spend $30–$40 million on credit cards. Maintaining a minimum of $30 million every week entails spending $120 million per month and $240 million over the next two months.

diminishing resources

The State Bank announced on Thursday that during the week ending May 26, its foreign exchange reserves had further decreased by $102 million. With only $4 billion in reserves, the central bank is barely able to cover its debt payments through June 30.

According to the State Bank, $102 million is being utilised to pay for the servicing of external debt. Total reserves decreased to $9.513 billion, of which $5.422 billion was held by commercial banks.

During the same week, commercial banks’ reserves fell by $116 million.

On Sunday, sources indicate OPEC+ is unlikely to agree to greater oil production curbs.

On Sunday, sources indicate OPEC+ is unlikely to agree to greater oil production curbs.

VIENNA: Despite a drop in oil prices around $70 per barrel this week, OPEC and its partners are unlikely to decide on additional oil production restrictions at a meeting on Sunday, two sources from the alliance said on Friday, but another said the outcome was still uncertain.

Around 40% of the world’s crude is produced by OPEC+, a grouping comprising the Organisation of the Petroleum Exporting Countries and allies led by Russia, therefore the group’s political actions can have a significant effect on oil prices.

When OPEC+ ministers meet on Sunday at 2 p.m. in Vienna (1200 GMT), two sources within the organisation said they did not anticipate the group to agree to additional output curbs. OPEC ministers will first convene on Saturday at 11 a.m.

According to sources, those anticipated to arrive in Vienna later on Friday include the United Arab Emirates’ and Algeria’s energy ministers as well as Prince Abdulaziz bin Salman of Saudi Arabia.

OPEC+ unlikely to increase oil production restrictions at meeting on June 4, according to sources

As the economy’s outlook worsened, a number of OPEC+ countries announced in April that they would make voluntary cuts starting in May, in addition to the 2 million barrels per day (bpd) that had been decided upon last year.

With ministerial bilateral meetings anticipated before to the meeting, another source stated that it was too early to predict the outcome of the Sunday meeting. The concept of formalising the voluntary cuts as an OPEC+ decision was being considered, according to a fourth source.

Oil prices rose by roughly $9 per barrel to above $87 as a result of the unexpected revelation in April, but they then declined to trade around $75 on Friday as worries about demand and global economic growth increased.

Prince Abdulaziz warned investors who he claimed were shorting the oil price to “watch out” last week, which many market observers saw as a threat of further supply restrictions.

However, according to Russian media, Russian Deputy Prime Minister Alexander Novak later stated he did not anticipate any fresh actions from OPEC+ in Vienna.