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Pakistan State Oil (PSO) has purchased 700,000 tonnes of fuel oil for delivery between April and July, according to industry sources.

Pakistan's leading oil marketer is said to have purchased 520,000 tonnes of high sulphur fuel oil at a premium of around $21 over the Middle East benchmark, on a free-on-board (FOB) basis.

The state-owned firm also bought 180,000 tonnes of low sulphur fuel oil at a premium of $113 over the Middle East benchmark, sources said.

PSO's decision to buy comes at a time when prices for the benchmark 180-centistoke (cst) grade have fallen by more than $67 since mid-February, when they hit their highest levels of the year so far, Reuters data showed.

The decline in fuel oil cargo prices has been mainly triggered by the drop in crude oil benchmarks following the uncertainty over oil demand from the United States and China, the world's largest consumers.

As a result, increased demand from countries such as Pakistan, where a low price point is considered important, could emerge over the coming period as certain players seek to take advantage of current market levels.

The majority of Pakistan's supplies tend to come from the Middle East due to the freight advantage that exists because of the proximity of the region to Pakistan, versus East Asia.

PSO typically buys from fuel oil players such as Bakri, Vitol, Trafigura and Glencore. Up until the end of 2011, the company had also been a regular purchaser of fuel oil from Sharjah-based FAL Oil, until the UAE firm was blacklisted by PSO after failing to meet its contractual agreements. Since then, FAL Oil has also been blacklisted by the United States due to its alleged links with Iran.

The fuel oil purchased by PSO is mainly used for power generation. Demand usually peaks during the summer, when less hydropower output means Pakistan has to turn to fuel oil-powered plants.

Pakistan is one of the few growth areas for the fuel oil market in the world as its electricity is still generated by oil-fired plants, while other countries have turned towards other power generation solutions due to environmental concerns.

PSO also acts as an intermediary for the supply of bunker fuel to the country's national shipping company, Pakistan National Shipping Corporation (PNSC), as well as to Pakistan's navy.