Gross refining margins in Pakistan averaged $28.8 per barrel in August 2026, sharply higher than the $5.4 per barrel recorded in the same month last year, according to industry data.
However, margins declined from $36.7 per barrel in July, mainly after the government capped high-speed diesel cracks at $41.89 per barrel effective August 20. Despite the monthly decline, refining margins remained above $20 per barrel for a second consecutive month, reported a national daily.
The strong year over year improvement was primarily driven by higher petroleum product prices amid the US-Iran war, which pushed up international energy prices and supported product cracks. The improvement came despite higher underlying crude oil prices.
Dubai crude, the benchmark used to calculate Pakistan’s GRMs, averaged around $88 per barrel in August, compared with $73 per barrel a year earlier. GRM calculations also include product supplier premiums and freight charges over benchmark crack spreads, although reported margins are calculated before duty differentials and inventory movements.
The government’s intervention in the HSD market was the main factor behind the month on month decline. The $41.89 per barrel cap took effect on August 20, meaning its impact was reflected in margin calculations for the final 10 days of the month.
The improvement comes as Pakistan’s refining sector undergoes major changes, with policymakers seeking to improve refinery economics, reduce reliance on imported petroleum products and encourage investment in refinery upgrades.
The stronger margins are expected to provide some relief to local refineries, although their sustainability will depend on global crude prices, petroleum product cracks, freight rates and government pricing policies.
The August average was more than five times the $5.4 per barrel recorded a year earlier, highlighting the significant improvement in refining margins over the past 12 months. Refinery industry representatives, however, said higher GRMs should not be interpreted as a major increase in refinery profitability.
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