- September 2, 2026
- Posted by: Tresmark
- Category:
No Comments
Pakistan’s gross refining margins (GRMs) averaged $28.8 per barrel in August 2026, marking a substantial improvement from $5.4 per barrel recorded in the same month last year, according to industry data.
Despite the sharp year-on-year increase, margins declined from $36.7 per barrel in July, mainly following the government’s decision to cap high-speed diesel (HSD) cracks at $41.89 per barrel from August 20.
The August reading kept Pakistan’s refining margins above $20 per barrel for the second consecutive month, highlighting a significant improvement in refinery economics compared with a year earlier.
US-Iran conflict supports product cracks
Analysts attributed the strong year-on-year improvement primarily to higher petroleum product prices amid the US-Iran conflict, which pushed international energy prices higher and supported product crack spreads.
The improvement came despite an increase in the underlying crude oil price. Dubai crude, the benchmark used in calculating Pakistan’s GRMs, averaged approximately $88 per barrel in August 2026, compared with around $73 per barrel in August 2025.
GRM calculations incorporate product supplier premiums and freight costs in addition to benchmark crack spreads. However, the reported margins are calculated before factoring in duty differentials and inventory movements.
HSD cap weighs on monthly margins
The month-on-month decline was largely linked to government intervention in the HSD market. The $41.89-per-barrel HSD crack cap took effect on August 20, meaning its impact was reflected in margin calculations for the final 10 days of the month.
The move comes as Pakistan’s refining industry undergoes major structural changes, with policymakers seeking to improve refinery economics, lower reliance on imported petroleum products and encourage investment in refinery modernisation.
High GRMs do not mean high net profits
The sharp improvement in GRMs is expected to offer some relief to domestic refineries, although industry representatives cautioned against equating higher gross margins with substantial profitability.
Refinery representatives said the sector’s net profit remains around 1% of total revenue, considerably lower than the profitability levels seen in sectors such as banking and fertiliser.
A senior refinery executive said refinery earnings remained limited despite the capital-intensive nature of maintaining the country’s energy supply chain.
The executive also pointed to rising crude procurement costs, noting that premiums on crude oil imports for September cargoes have increased to around $20 per barrel, compared with $7-$12 per barrel previously.
The higher crude premiums could put additional pressure on refinery margins and profitability in the coming months.
Margin outlook remains dependent on global factors
While August’s GRM performance represents a major improvement over last year, analysts said the sustainability of elevated margins will depend on several factors, including global crude prices, petroleum product cracks, freight rates and government pricing policies.
For local refineries, the strong year-on-year recovery provides improved near-term economics, but rising crude premiums and regulatory interventions could limit the extent to which higher gross refining margins translate into stronger bottom-line earnings.
