Pakistan State Oil (PSO) has reduced its fuel oil imports for power generation after recent monsoon rains helped to ease power demand from air-conditioner users. This led to a fall in fuel oil premiums from the multi-year highs reached at the end of June.
Since May, the state-owned company has sought to import 695,000 tonnes per month of fuel oil, an increase from its typical monthly range of 400,000-650,000 tonnes in 2017. The extra demand pushed premiums higher, since it occurred while supplies tightened during the Northern Hemisphere’s summer, when fuel oil consumption for power generation rises.
Citing trade sources, Reuters said PSO had not awarded tenders for high- or low-sulphur fuel oil for late June, early-July and mid-July delivery after receiving offers from suppliers. It is believed that the company last imported fuel oil for delivery in June 11-20. But according to tender documents, PSO still has outstanding tenders for imports for delivery from the end of July to September.
The higher monsoon rainfall – the country’s heaviest rains in 38 years – also boosted hydropower plant (HPP) generation, which also contributed to weaker fuel oil demand.
Combined with Pakistan still possessing ample stock and local fuel oil production, PSO has been able to reduce imports. The newswire cited one unnamed trader as saying the company might not import any more fuel oil this year, and if it does it will be a cargo or two at the most.
The country’s lower fuel oil demand has had a ripple effect across the continent, leading to weakness in Asia’s fuel oil market last week, with premiums retreating.
The lower fuel oil imports also come as Pakistan LNG cancelled a tender for six LNG cargoes for delivery in July and August. With weaker demand for electricity, the need for gas imports has also shrunk.
In December 2017, PSO halted fuel oil imports as the country scaled up its LNG consumption in the power sector. This was short-lived, though, as strong seasonal power demand in the summer months and technical issues leading to delays at some of its newest gas-fired power plants renewed the need for fuel oil.