KARACHI: Gross refining margins (GRMs) averaged $28.8 per barrel in August 2026, marking a sharp improvement from $5.4 per barrel recorded in the same month last year, according to industry data.
However, refining margins declined month-on-month (MoM) from $36.7 per barrel in July 2026, primarily due to the government’s decision to cap high-speed diesel (HSD) cracks at $41.89 per barrel from August 20, 2026.
The latest improvement kept Pakistan’s refining margins above $20 per barrel for the second consecutive month.Analysts said the year-on-year (YoY) increase was mainly driven by stronger petroleum product prices amid the US-Iran war, which pushed up international energy prices and supported product cracks. The improvement came despite a rise in the underlying crude oil price during the period.
Dubai crude, which is used as the benchmark for calculating Pakistan’s GRMs, averaged around $88 per barrel in August 2026, compared with $73 per barrel in August 2025.GRM calculations take into account product supplier premiums and freight charges over and above the benchmark crack spreads. However, the reported margins are calculated before accounting for duty differentials and inventory movements.
The sequential decline in August margins is largely linked to the government’s intervention in the HSD market. The HSD crack is capped at $41.89 per barrel effective August 20, with the impact of the measure incorporated into the calculations for the final 10 days of the month.
The development comes as Pakistan’s refining sector undergoes significant changes, with policymakers seeking to improve refinery economics, reduce dependence on imported petroleum products and encourage investment in refinery upgrades.
The sharp rise in GRMs compared with last year is expected to provide some relief to local refineries. However, analysts caution that the sustainability of margins will depend on global crude prices, product cracks, freight rates and government pricing policies.
The August performance nevertheless represents a substantial improvement over the weak margins witnessed a year earlier. The average GRM of $28.8 per barrel is more than five times the August 2025 level, underscoring the major shift in refining profitability over the past year.
Refinery industry representatives, however, said the perception that higher GRMs have translated into substantial profits was misplaced, arguing that the sector’s net profit remained around 1.0 per cent of total revenue.
A senior refinery executive told The News that refinery-sector profits are negligible compared with those of the banking and fertiliser sectors, despite the intensive operations required to maintain a smooth energy supply chain in the country. He said the premium on crude oil imports for September cargoes have risen to $20 per barrel from $7-$12 previously, which will put further pressure on refinery margins and profitability.
