LAHORE During the current fiscal year that is ending on June 30, the government, till May, increased the prices of regulated petroleum products including petrol, diesel, kerosene and LDO by around 29 per cent on average, while the rate of furnace oil, which is totally deregulated and mainly used for power generation, was raised by 60 per cent. According to energy experts, FY11 once again was marked with high volatility in the international oil prices primarily on account of political unrest in Middle East and uncertainty surrounding the global economic recover. Where, WTI crude prices jumped by 22 percent on closing day basis, average prices stood at $89 per barrel (up 19 percent). On the other hand, Arab light crude oil prices, a benchmark crude for local energy companies, rose by a massive 52 percent during FY11 whereas average price stood at $91 per barrel (up 24 percent). However, contrary to historic trends, Arab light in FY11 traded at average premium of US$3 per barrel (3 percent) to WTI against last 5-yr discount of US$2 per barrel (-3 percent), indicative of changing demand patterns of the international oil market. The premium currently stands at US$15 per barrel. This could be due to higher demand from Asian region especially from China and India. The same price trend was reflective in middle distillate prices, with price of HSD went up 45 percent while price of the FO (Furnace oil) rose by 46 percent in FY11. Nauman Khan, an energy expert, observed that amid popular uprising in the MENA (Middle East and North Africa) region and turbulence in currency markets, crude oil prices remained on the higher side in the outgoing FY11. With almost one week remaining, WTI and Arab crude, benchmark for Pakistan, oil prices during FY11 have surged by 22 percent and 52 percent, respectively. Most importantly, sharp increase in Arab gulf crude as compared to WTI is indicative of changing demand pattern of international oil markets On the local front, the rise in the intl oil price unleashed the pricing pandora where govt attempted various measures (incl. reducing PL, fixing OMC margins and abolishing wharfage & incidental charges) to keep the domestic oil prices under check. Despite all these measures local oil products prices grew by 28-60 percent with diesel and petrol prices touched their all time high in May 2011. He said the rising trend in the international oil prices raised concern for policy markers to keep domestic oil prices in check. The govt initially abolished incidental and wharfage charge along with fixation of OMCs in rupee terms. This development adversely affected the profitability margins of refineries and OMCs. Furthermore, the govt also had to take a hit on its Petroleum Levy, which was slashed to bear minimum on various petroleum products. In particular, PL on diesel was eventually slashed to Rs0.55 per liter originally from Rs8 per liter. The energy analyst expects global oil market to display high volatility on account of divergent views regarding the global economic health. However, based on prevalent trends we expect oil prices to remain firm around the levels of US$96 per barrel in FY11.