LAHORE: Pakistan’s gross refining margins (GRMs) averaged US$18.3 per barrel in September 2026, falling below the US$20 mark after remaining above that level for the previous two months, according to Topline Research.
The September margin was nevertheless substantially higher than the US$6.2 per barrel recorded in September 2025, reflecting a strong year-on-year improvement in refinery economics amid higher international petroleum product prices.
On a month-on-month basis, however, the margin declined sharply from US$30.1 per barrel in August 2026. Topline Research said the sequential deterioration was primarily driven by crude prices rising faster than petroleum product prices, while the government’s cap on the high-speed diesel (HSD) crack at US$41.89 per barrel, effective August 20, continued to weigh on margins.
The latest estimate takes the calculated industry GRM for the first quarter of FY27 to US$27.6 per barrel, according to the research house.
Topline Research calculates GRMs before accounting for duty differentials and inventory movements. Its methodology also incorporates product supplier premiums and freight charges over and above the underlying crack spreads.
The sharp improvement compared with September last year was attributed largely to stronger petroleum product prices amid the US-Iran conflict, which supported international fuel prices and product cracks.
However, the higher crude price environment has increasingly offset some of the gains in product prices.
According to Topline Research, Dubai crude averaged US$114 per barrel in September 2026, compared with approximately US$70 per barrel in September 2025. The rise in the crude benchmark significantly increased the feedstock cost faced by refineries.
The research house also pointed to a substantial increase in crude supplier premiums. Based on its market channels, spot premiums rose to around US$35–40 per barrel during September 2026.
The impact of these elevated premiums, however, is expected to become more visible in refinery economics during October and November because crude cargoes booked during September are generally received in subsequent months.
For its September calculations, Topline Research assumed a crude premium of US$4 per barrel, meaning the much higher spot premiums reported during the month have not yet been fully reflected in the calculated GRM.
The government’s HSD pricing mechanism has also become an important factor for refinery margins. The US$41.89-per-barrel cap introduced on August 20 limited the benefit domestic refiners could derive from higher international diesel cracks.
Industry calculations reported earlier indicated that international diesel cracks subsequently remained considerably above the level incorporated into Pakistan’s pricing formula. The News reported on October 2 that the average international diesel crack since the revised mechanism was introduced had been around US$51.85 per barrel, compared with the US$41.89-per-barrel cap.
The cap had already affected August margins, with Topline Research estimating Pakistan’s GRMs at US$28.8 per barrel in August, down from US$36.7 per barrel in July but still substantially above the US$5.4 per barrel recorded in August 2025.
The September decline therefore marks a further moderation in refinery margins from the exceptional levels recorded during the summer, even though the sector remains significantly better positioned than a year earlier.
The broader improvement in refinery performance has also been reflected in financial results. Pakistan’s listed refinery sector posted a combined Rs54.8 billion net profit in FY26, compared with losses in the preceding year, while sector revenue rose 27% to Rs1.54 trillion, according to data compiled by Arif Habib Limited and reported by The News.
At the same time, the sector is entering a major investment phase. Four major refineries—Attock Refinery, National Refinery, Pakistan Refinery and Cnergyico Petroleum—have moved ahead with agreements linked to long-awaited refinery upgrade projects, with industry-wide investment plans running into several billion dollars.
The September GRM reading consequently comes at a critical point for Pakistan’s refining industry, as refiners contend with volatile crude costs, elevated supplier premiums and changes to the domestic fuel-pricing mechanism while preparing for large-scale modernisation projects.