Pakistan’s refining sector witnessed a significant increase in production during May 2026, yet fuel sales failed to keep pace, highlighting growing demand-side challenges for the industry.
According to industry data, refinery production climbed by 22.5% year-on-year to 1.01 million tonnes in May. The increase was driven by stronger output across key petroleum products, including diesel, petrol, and furnace oil. However, despite higher production levels, overall refinery product sales declined by 7% compared to the same period last year.
The mismatch between production and sales suggests that refineries accumulated additional inventories during the month, raising concerns about market absorption and future operational planning.
Higher Output Across Major Fuels
Refineries increased production of high-speed diesel (HSD) by 17.6% year-on-year, reaching 492,000 tonnes. Petrol production also posted healthy growth, rising 14.4% to 242,000 tonnes. Meanwhile, furnace oil output recorded the strongest increase, surging 37.9% to 224,000 tonnes.
Improved refinery activity was reflected in industry utilization rates, which rose to 59.2% in May, compared with 58.1% in April and 48.3% in May 2025. This indicates that refining facilities operated more efficiently and at higher capacity levels than a year ago.
Among the major players, Pakistan Refinery Limited recorded the highest utilisation rate at 73.5%, followed by Attock Refinery Limited at 69.3%. National Refinery Limited operated at 57%, while Cnergyico posted the lowest utilization level at 22.4%.
Diesel Demand Remains Under Pressure
While production expanded, demand for diesel weakened considerably. HSD sales dropped 19.1% year-on-year to 409,000 tonnes during May.
Industry experts attribute part of this decline to reduced purchases by oil marketing companies and the continued influx of smuggled diesel into the country. Estimates suggest that approximately 5,000 tonnes of diesel enter Pakistan illegally every day. Considering national diesel consumption averages around 22,000 tonnes daily, smuggled supplies are believed to account for nearly one-quarter of the market.
The widespread availability of untaxed fuel continues to challenge legitimate refiners and distributors by eroding market share and reducing sales volumes.
Petrol Shows Greater Stability
Unlike diesel, petrol demand remained relatively resilient. Motor spirit (MS) sales increased by 4.3% year-on-year, reaching 247,000 tonnes in May.
This stability helped offset some of the weakness seen in other fuel categories, although it was not enough to prevent the overall decline in refinery offtake.
Mixed Performance Among Refiners
Performance varied across individual refining companies.
National Refinery Limited emerged as one of the strongest performers, with sales increasing 21.2% year-on-year to 135,000 tonnes, supported by higher petrol and furnace oil demand.
Pakistan Refinery Limited also delivered positive results, recording a 3.4% increase in sales to 144,000 tonnes. Growth was primarily driven by stronger furnace oil volumes.
In contrast, Attock Refinery Limited experienced a 16.6% decline in sales, with total volumes falling to 112,000 tonnes. Although petrol sales improved significantly, weaker diesel and furnace oil demand weighed on overall performance. The company’s market share also slipped below its historical average.
Cnergyico faced similar challenges, with sales declining 11.5% year-on-year to 152,000 tonnes due to lower diesel and petrol volumes.
Stronger Fiscal-Year Demand Offers Some Relief
Despite the softer performance in May, the broader trend for FY2026 remains encouraging. During the first eleven months of the fiscal year, total refinery offtake increased 10.4% year-on-year to 9.9 million tonnes.
Petrol demand rose by 10.8%, while diesel consumption expanded by 17.1% during the same period, reflecting stronger overall economic activity and transportation needs throughout most of the year.
Outlook for the Refining Sector
The latest figures present a mixed picture for Pakistan’s refining industry. On one hand, higher utilization rates and increased production demonstrate improving operational efficiency and stronger refining activity. On the other hand, slowing diesel and furnace oil sales, coupled with the persistent issue of fuel smuggling, continue to create pressure on revenues and inventory management.
Going forward, the sector’s performance will largely depend on demand recovery, effective action against fuel smuggling, and the ability of refiners to align production levels with market requirements. Until then, rising inventories may remain a key concern despite healthier production numbers.