Pakistan ENERGY_ Cheap FO makes for a compelling comeback story, (AKD Daily, Jan 09, 2020)
Pakistan ENERGY: Cheap FO makes for a compelling comeback story,
- Dec’19 consolidates major shifts in international refining margins, with MS/HSD/HSFO crack to Arab Light for the month averaging US$-0.3/+6.9/-32.2/bbl vs. 4QCY20 averages +2.1/+8.7/-27.0/bbl where HSFO shows a continued break downward despite crude treading higher (Brent/Arab Light averaged US$65.9/68.2/bbl up ~5%MoM)
- FY20TD average cracks of light distillates HSD/MS averaging at US$+10.07/+2.7/bbl firming their spreads (vs. 4QFY19 average of +8.9/+1.7/bbl) and HSFO cracks worsening to average -16.7/bbl (vs. 4QFY20 average of -9.4/bbl) tanking further to US$-27.0/bbl during 4QCY20, contrasting the divergence between light vs. heavy distillate prices
- Barring US-Iran tensions, Saudi Arabia and other OPEC+ nations reaching a consensus on furthering supply cuts during 1QCY20 coupled with dissipating trade tensions are fueling bullish sentiment in crude, which are likely to prove positive for global refining cracks
- Monitoring moves in HSFO 180 CST commodity futures contracts we highlight the continued slide in HSFO futures prices for delivery contracts during CY20 (lower by US$24.2/mt on average vs. June’19 settlements) extending to US$82.6/mt avg. for CY21
- Considering the proposed power tariff hikes (under the new full tariff recovery mechanism) and elevated gas prices, we believe the case for FO based captive power generation is gaining steam, while efficient FO power IPPs are better placed to move up the merit order and restart supplying electricity to the grid.
AKD Research
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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