KARACHI: Gross Refining Margin (GRM) averaged negative $4.21/bbl during June-2020, reflecting a massive year-on-year decline of $13.12/bbl.

This huge decline was mainly due to Covid-19 which has created demand-side pressure mainly on Motor Gasoline (MS) and High Speed Diesel (HSD) markets. MS margin is currently negative $7.27/bbl against $11.75/bbl in the same month last year. Similarly, HSD margins are down from $23.45/bbl in June last year to negative $0.27/bbl in June 2020. Further down the barrel, Furnace Oil (FO) and Naptha margins are negative $10.17/bbl and negative $11.58/bbl. Naphtha crack spreads performed negatively as Singapore naphtha prices rose further and drove cracks deeper into negative territory on the back of lower requirements from the petrochemical sector. On a sequential month-on-month basis, average GRM declined from $7.57/bbl to negative $4.21/bbl in Jun-2020. Among the categories, on MoM basis, NAPTHA, FO, MS, and HSD margins have declined by $5.01/bbl, $9.47/bbl, $22.42/bbl and $10.72/bbl respectively.

"The severe downturn in fuel consumption is expected to extend for the foreseeable future, and the negative impact (pressure on fuel prices due to higher product availability) could prolong into 2HCY20," Arsalan Ahmed, an analyst at JS Global Capital said.

Moreover, the traditional bullish factors for fuel markets seen during summer season are expected to be largely outweighed by the Covid-19 related weakness, he added.