OMC sales up by 15 percent in 11 months

Total sales volume of the Oil Marketing Companies (OMC) industry rose by 15 percent to 16.2 million tons during the first 11 months ended May 31 as compared to 14.1 million tons recorded during the corresponding period of last year. On the monthly basis, the total industry sales rose by 17 percent to 1.8 million tons, the highest sales since July 2005.
The major thrust in total sales came from furnace oil sales, which surged by 51 percent to 6.8 million tons during this period over 4.5 million tons previously. "The role of furnace oil sales during this period has been all the more crucial when we see the effect of overall volumes without its impact, Jawad Haleem, an analyst at Atlas Capital Markets, said. Excluding this, overall sales of the industry would have been down by two percent, he added.
This downfall emanated from a decline in all white oil products, whereby sales of Kerosene, JP-1, Motor Spirit and Diesel fell by 10 percent, seven percent, four percent and one percent respectively.
A monthly comparison shows that during May, sales of all products, except JP-1, depicted an increase. Total industry sales rose by 17 percent on month-on-month basis to 1.8 million tons, the highest sales since July 2005. The increase in demand during May has also been supported from HSD sales, which stood at 0.77 million tons, also the highest since July 2005. The sharp increase could be attributed to the increase in demand for generators following the long and frequent power breakdowns. It would be worth highlighting that May also saw a two-year high of fuel oil sales at 0.8 million tons.
Having the largest distribution network, PSO benefited the most from the increase in demand of HSD and FO. Its sales of the two products rose by 12 percent and 72 percent during the first 11 months of 2007 respectively, while overall sales volumes surged by 35 percent on year-on-year, taking its market share to improve by 11pps to a near record 72.5 percent.
Shell's market share was down by 4pps at 14 percent due to a decline in its total sales by 10 percent. APL's sales on the other hand were up by two percent while its market share was down by 1pp.
In the budget, CED on motor gasoline and JP-1 was reduced by Rs 0.88 per/litre and Rs 0.06/litre respectively. This will have a very negligible impact on the industry, as their volumes are relatively much lower and on MoGas, the government did not pass the benefit to the consumers and simply shifted the lost amount from CED into PDL.
Apart from that, the constant increase in oil prices is expected to bode well for the sector on the whole during the fourth quarter. Nevertheless, earnings for the full year are expected to be lower due to a squeeze in overall OMC margins following a formula change in March 2006, Jawad added.