PSO cancels imports of 400,000 metric tonnes of diesel as demand declines

KARACHI: In response to a mounting surplus of fuel oil within Pakistan, Pakistan State Oil (PSO) has canceled approximately 400,000 metric tonnes of diesel imports since the beginning of 2024.

The move comes amidst a significant decline in demand for diesel leading to surplus supply, coupled with escalating challenges faced by the petroleum industry, including refineries and Oil Marketing Companies (OMCs).

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In a statement released by PSO, the company underscored the detrimental effects of diesel smuggling, which not only erodes legal sales but also exacerbates inventory levels, imposing financial strain and sustainability concerns on the industry.

The company pointed out that various factors, including delays in the agricultural season, unseasonal rains, and decreased industrial activity, have contributed to the notable drop in diesel demand, which has plummeted by approximately 30 per cent compared to previous year.

Compounding these challenges, local refineries have unexpectedly ramped up production, surpassing typical output levels. This surge in production has only exacerbated the existing surplus issue, prompting PSO to take strategic measures to alleviate the situation.

In response, PSO has opted to reduce diesel imports, leveraging its longstanding partnership with Kuwait Petroleum Corporation (KPC) to negotiate these reductions. The company stressed that while these actions extend beyond contractual obligations, they are necessary to address the immediate imbalance between supply and demand.

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PSO’s statement added that the company expects the current supply-demand disparity to be short-term, based on historical sales and demand patterns. However, immediate corrective measures are necessary to mitigate risks and prevent long-term adverse consequences for all stakeholders involved.