Pakistan caps diesel crack, adopts Platts Dubai benchmark to set fuel prices

Pakistan will strictly limit local refiners' crack spread on domestic diesel sales to reduce the burden on consumers from elevated international prices and refining margins, while fully adopting Platts benchmarks to determine domestic fuel prices, according to a Ministry of Energy letter sent to the Oil and Gas Regulatory Authority on Aug. 21.

Under the revised crude-based pricing mechanism, Pakistan has capped the high-speed diesel refining crack spread at $41.89 per barrel while retaining a floor of $11.33/b to support refinery operations, according to the Energy Ministry letter seen by Platts, part of S&P Global Energy.

The decision effectively caps refiners' wholesale and retail diesel sales prices by limiting the upside domestic refiners can capture from exceptionally high international benchmark diesel prices, which have surged amid global trade disruptions and geopolitical tensions, according to the Ministry and industry analysts.

The international diesel crack averaged $65.03/b over the past two weeks and $55.60/b since July 2026, well above the new ceiling of $41.89/b, Research house Topline Securities said in its latest August market analysis report.

Platts assessed the second-month Singapore gasoil swap crack against Dubai crude swaps at an average of $64.67/b so far in August, up from the July average of $56.14/b and the June average of $42.57/b. Platts assessed the crack spread at $70.05/b on Aug. 21.

"After detailed deliberations, and keeping in view the sustainability and broader interests of the public, the refineries agreed to the proposal for reintroduction of the crude-based pricing mechanism," the Ministry of Energy said in its letter to OGRA.

The Federal Cabinet approved the mechanism, which will remain in place for two months. However, the government may review it earlier if geopolitical conditions improve and international oil prices and cracks decline sharply, the ministry said.

"We believe capping on margins on HSD may continue until normalcy returns," Asad Ali, research analyst at Topline Securities, said in an Aug. 20 report.

Platts Cash Dubai to anchor HSD pricing

Under the revised framework, OGRA will use a seven-working-day rolling average of the Platts benchmark Cash Dubai as the base for daily HSD pricing.

The HSD crack will be calculated on a seven-working-day average of the Platts Cash Dubai as the outright anchor price and will be subject to the $41.89/b ceiling and $11.33/b floor, according to the Energy Ministry.

Platts assessed Cash Dubai at an average of $93.03/b in the assessment week of Aug.17-21. The international physical sour crude benchmark averaged $88.61/b in the previous assessment week of Aug. 11-14.

The government said the range was derived from the weighted average cracks of HSD, motor spirit and high-sulfur fuel oil over the previous four fiscal years and the first nine months of fiscal 2025-26 (April-March). The mechanism is intended to preserve a historic weighted average crack of $6.16/b, according to the ministry.

The formula will also include Saudi Arabia's monthly Asia official selling price differential for Arab Extra Light crude, the Energy Ministry said, adding that the adjustment would apply to Gulf-region crude, including supplies arriving through Fujairah and Yanbu.

For September-loading Arab Extra Light crude bound for Asia, the OSP differential was set at a discount of $1.5/b to the Oman/Dubai average, down 50 cents/b from August OSP differential of minus $1/b.

Although the cap is below current market levels, it remains well above the longer-term average analysts use to assess refinery profitability.

"We believe refineries can still make decent profits based on capped GRM levels as historic 10-year average of HSD crack spread has averaged at $15.8/barrel," Ali said.

OGRA to publish prices without further approval

A key operational change under the revised mechanism is that OGRA will be authorized to calculate and publish maximum ex-depot prices for HSD on a daily basis without seeking separate approval from the federal government or the prime minister.

To improve transparency, OGRA will also publish the relevant daily Platts assessments for 10 ppm HSD and Cash Dubai on its website, providing market participants with greater visibility into the benchmarks used to calculate domestic prices.

The ministry directed OGRA to notify the Directorate General Oil and the provincial chief secretaries whenever daily prices are published.

The government also retained daily pricing for petroleum products, except during Platts pricing holidays and gazetted holidays. Friday's notified prices will remain effective through Saturday, Sunday and Monday because Platts assessments are not published over the weekend.