JS Securities Limited - Morning Briefing.

Karachi -- March 27, 2019 (PPI-OT)

Mar'19 GRMs down 40% YoY; MS spread to its lowest level since 2012

GRMs for Mar-2019 decreased 40% YoY to US$6.73/bbl due to weakening MS, HSD and Naphtha margins. MS spreads - a key marker for profitably - stood perilously low at US$0.44/bbl in Mar'19, their lowest level since Jun'12.

On the other hand, sequential uptick of 87% MoM in GRMs is a result of strong middle of the barrel margins (HSD and KERO).

We expect refinery margins to recover in the short term due to recovery in HSD margins. That said, additional Chinese supplies would prove a certain dampener on already oversupplied product markets in our view.

Multiyear low MS margins continue to weigh on GRMS

During Mar-2019, gross refining margins (GRM) averaged US$6.73/bbl, marking a YoY decrease of US$4.41/bbl or 40% in percentage terms. GRMs during the month trended lower, mainly due to multiyear record low MS margins (down by 97% YoY to perilously low levels of US$0.44/bbl), which in turn have been struggling from the prevailing gasoline surplus. Naphtha spreads slumped further to negative US$10.24/bbl from negative US$4.44/bbl, shadowing gasoline weakness amid tempered demand from the petrochemical industry. Other products also showed a similar trend during the month: High-Speed Diesel (HSD) posted a 26% decline YoY while Kerosene and Jet fuel (JP-1) were each down by18% YoY.

GRMs up 87% MoM, owing to 65%...