Refineries: Firm Dec-10 GRMs despite marginal MoM trimming

Marginal MoM decline in Dec-10 GRM: Gross refining margins for local refineries clocked in at USD4.27/bbl during Dec-10, trimming by 2%, or USD0.9/bbl MoM. Higher contribution from deemed duties, owing to 3.7% MoM increase in oil prices during Dec-10, helped limit decline as GRM without duties was down by 9% MoM.

HSFO spreads weakened significantly in Dec-10 due to higher likely refinery runs: HSFO spread widened by USD1.76/bbl over the previous month, likely due to higher refinery runs owing to the end of maintenance season and higher distillates spreads due to winters.

Listed refiners – GRMs fall for NRL & PRL, rise marginally for ATRL: Amongst the listed refineries, ATRL witnessed a negligible USD0.01/bbl MoM expansion in GRMs whereas NRL witnessed a USD0.06/bbl decline over the previous month. PRL saw its margin lose a hefty USD0.45/bbl (-28%) over the previous month during Dec-10.

Marginal MoM decline in Dec-10

Gross Refining Margin (GRM) for local refineries posted 2% (USD0.9/bbl) MoM decline in Dec-10 to clock in at USD4.27/bbl. While excluding duty impact GRM would have been down by 9% (USD0.17/bbl), 3.7% MoM increase in oil price and the resulting increase in the absolute benefit of deemed duty on HSD helped limit the decline in GRM. Dec-10 GRM, however, was still 14% higher than trailing twelve months average and 8% higher than what it averaged during the last six months.

HSFO spreads weakened significantly in Dec-10 due to higher refinery runs

Besides USD0.05/bbl contraction in Kero spread, HSFO was the only major contributor to MoM contraction in GRMs. Spread for HSFO clocked in at USD-13.03/bbl during Dec-10, USD1.76/bbl lower than Nov-10, with decline likely coming from higher refinery utilizations.Refinery utilization would likely have increased during Dec-10, due to end of the maintenance season and higher distillates demand during winters. While HSD spread rose by USD0.05/bbl MoM, duty impact magnified the increase to USD0.33/bbl. Spread for Mogas (95RON) increased by USD1.65/bbl, and Naptha by USD0.48/bbl over the previous month.

Listed refiners – GRMs fall for NRL & PRL, rise marginally for ATRL

Amongst the listed refiners, ATRL witnessed a negligible USD0.01/bbl MoM expansion in GRMs, as higher share of Mogas in its product slate helped offset the impact of weak HSFO spread. NRL witnessed a USD0.06/bbl decline in GRM over the previous month. PRL witnessed the greatest weakening in GRM as it saw its margin lose a hefty USD0.45/bbl (-28%) over the previous month during Dec-10.

Economic & Political News

MQM to sit in opposition

The second largest coalition partner, MQM, on Sunday quit the government to join the opposition. The meeting decided that MQM’s parliamentarians would sit on opposition benches in both the houses of the Parliament; however, they would support every positive step of the government while remaining in opposition. An administration that took power less than three years ago following elections has now lost its majority in parliament and faces possible collapse if the opposition unites to pass a vote of no-confidence. Without MQM’s 25 seats, the PPP’s coalition numbers 160 seats in the 342-member National Assembly, 12 short of the 172 required for a majority.
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