OMC sales and lockdown

No prizes for guessing how coronavirus has affected oil consumption in April 2020. As the virus took strong hold on the country, declining economic activity and restricted mobility as lockdown continued brought the OMC sales even lower. According to OCAC data, sales of petroleum products by the OMCs in April 2020 was down by 36 percent year-on-year. The largest decline was seen in furnace oil which has been on a downward path for at least a couple of years now.

Motor gasoline sales were down by over 35 percent year-on-year; sales of jet fuel were down by 84 percent as flight operation remained suspended. There was a strong rebound in high speed diesel sales on month –on-month basis (42 percent) in April 2020 due to some easing in the country-wide lockdown and the commencement of harvesting of Rabi crop. However, HSD sales remained 16 percent lower than April 2019.

OMC sales have been slowing down before the coronavirus pandemic and the resulting lockdown as FO is being replaced with RLNG and coal power plants. At the same time, diesel has been under duress due to slower economic and ensuing transportation activity in the country and continued and influx of grey product; while motor gasoline growth was impacted by falling car sales and rising fuel prices.

Overall, OMC sales of the three key products have seen a decline of over 12 percent in10MFY20. The product wise trend has been constant for a long time led by falling furnace oil sales, followed by HSD and petrol (motor gasoline).

Where does oil consumption go from here? The future route of petroleum product consumption and sales again rest upon the crude oil prices, and the lockdown/shutdown dynamics. April was expected to be weaker additionally due to Ramadan as all industrial activity usually slows down during the holy month.

Flight operation suspension though partially lifted, will continue to adversely affect the consumption of jet fuel. Retail fuels will get some boost particularly HSD during the harvesting season as well as easing of lockdown. Recent downward price revision will also play a role in consumption. News reports suggest that some OMCs held back sales in order to benefit from fluctuating prices, while PSO sold record HSD in the beginning of May 2020.