SINGAPORE, June 28: Pakistan State Oil bought smaller volumes of up to 750,000 tons of July-September fuel oil at lower premiums, as demand was curbed by ample hydropower even as the country struggles with lagging generation capacity, an official said on Thursday.

PSO bought six firm parcels of 65,000-ton each of high-sulphur fuel oil, for July-August delivery, at premiums of $12-$16 a ton to Middle East spot quotes, and four optional lots at premiums of $15.00-$19.80.

The PSO also bought an optional 50,000-ton low-sulphur (LSFO) cargo of 170-centistoke (cst) and up to 0.99 per cent sulphur, at a premium of $62.93 from FAL.

The lower volumes were due to reduced oil requirements from utilities, which are getting more power from hydro-generation due to the current monsoon.

But the increased hydropower supply is still unable to stave off the recent power shortage, because of insufficient generating capacity in the country.

“We have not been asked to buy more by the utilities. While there is a serious problem with the power shortages, it is not one due to a shortage of fuel but a shortage of generating capacity and there's not very much we can do about it,” the official said.

The shortages have been caused by growing electricity demand, expected at eight per cent annually over the next five years, outstripping supply that is anticipated to grow at seven per cent.

The current problem was exacerbated by the breakdown of two generating units, sparking riots in Karachi and resulting in up to six cuts a day in Lahore.

PSO bought up to 1 million tons of 125-180-cst fuel oil in its May-July tender, including eight firm cargoes, at premiums of $13.50-$16.75 a ton to Middle East spot quotes, C&F, and another six optional parcels at premiums of $16.29-$19.23, from FAL and Bakri.

It also bought one firm parcel of LSFO at a premium of $56.96 a ton and another optional lot at a premium of $63.49.—Reuters