Petroleum sales: slump continues

BR Research September 4, 2019

The ongoing crash in petroleum product sales is only prolonging. The overall volumetric sales by the sector have seen a decline of around 20 percent in August 2019 on a month-on-month basis. While the year-on-year decline during the month was only 4.4 percent, it was purely because of low base in August 2018 as well. This is because of the ongoing FO curtailment drive as well as the decline in the overall economic slowdown that has affected MS and HSD sales.

Furnace oil sales dropped by 39 percent month-on-month in August 2019, followed by 30 percent decline in diesel sale and 4 percent decline in motor gasoline volumes. The decline in FO and HSD was less drastic on a year-on-year basis for reasons mentioned before.

The higher month-on-month decline in FO sales in August 2019 was largely due to higher power generation demand in July 2019 followed by a rainy August that lowered the overall electricity consumption. Furthermore, the decline in FO consumption is also led by increased RLNG consumption instead for power generation from the gas companies to reduce the gas pressure building in the gas pipelines due to excess gas.

Decline in HSD volumes and MS volumes have been due the ongoing rains as well as the ongoing slump in the economic activity. At the same time, higher diesel prices and petrol prices have also affected demand of the petroleum products.

Decline in the OMCs’ sales is just adding to the miseries of the segment. Where lower sales volumes have dented the profitability in recent times, the OMC sector has also been facing issues like significant exchange volatility due to currency depreciation in the last one year, which has also hammered the sector’s profitability. Also highlighted by Nadeem Babar in his recent interview with BR Research (Read: Most refineries should be shut down because they are too old and inefficient), some large player have also been facing difficulty in expanding their retail network (due to OGRA’s storage regulations).

Copyright Business Recorder, 2019

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