Petroleum sales consolidating

The sales of petroleum products by the oil marketing companies have nothing new going; the trend of falling furnace oil and supportive retail sales continues to hover. For the last three months, furnace oil monthly volumes sold by the OMCs have seen double digit year-on-year drop, averaging 44 percent. Meanwhile petrol (motor gasoline) and diesel (HSD) have played the role of some smoothening amid these heavy falls.

February 2018 has been relatively a slower month for petroleum sales; the volumes for furnace oil dipped by 55 parent, year-on-year followed by a three percent decline in HSD volumes. Motor gasoline inched up by around 4 percent. A slower month also signifies lower imports. Not only did the furnace oil imports witness a year-on-year decline (57 percent), motor gasoline and HSD imports were also curtailed during the month by 27 and 30 percent, respectively.

The reasons for the unsurprising continuity of the trend are well known: the government is attempting to curtail furnace oil consumption in the power sector as it wants to replace it with imported RLNG. For this, it had banned the usage of furnace oil by the power sector in early November, which attracted an upheaval from the downstream oil and gas sector. However, later the ban was lifted partially to smooth out the over supply of furnace oil - refined and imported. The decreased furnace oil consumption depicts the waning demand from the power sector.

While the year-on-year imports depict similar pattern, February 2018 furnace oil figures from OCAC show a significant month-on-month increase over lower FO imports in January. While the February imports as per OCAC numbers are not out of range when compared to earlier months like November and December 2017 (and certainly not when compared to months prior to the FO curtailment plans), very low imports in January 2018 coincided with the government’s plan of gradually banning furnace oil imports.

One possible explanation for the increase in FO imports in February 2018 is the government’s resumption of furnace oil imports. After a three month suspension, the government has reportedly ordered PSO to arrange import of furnace oil for the power sector in early February. The reason for the change in policy stance could have come from PSO rising receivables.

Overall, petroleum sales of the three key products by the OMC sector in 8MFY18 stood over 15.5 million metric tons, down by around two percent year-on-year largely due to relatively lower furnace oil consumption during the current period. During the first eight months of the ongoing fiscal year, furnace oil sales were down by 22 percent, year-on-year, while HSD and motor gasoline were both up by 7 and 12 percent, respectively.