Oil sales remain optimistic

Petroleum sales in the country have been robust in the last couple of years as oil prices glided down. The increase in sales has been predominantly in the retail fuels like diesel and petrol (motor gasoline), aided by increase in demand.

The latest 10MFY17 figures from Oil Companies Advisory Council (OCAC) show that the growth in petroleum sales by the oil marketing companies continued albeit with less fervour. Overall, the sales of three key petroleum products: furnace oil, high speed diesel, and motor gasoline, increased by 12.14 percent year-on-year, while the imports of the same grew by around 20 percent, year-on-year. Unsurprisingly, growth in sales volumes for 10MFY17 was led by motor gasoline (up by 17% YoY), followed by HSD and then furnace oil.

For the latest month, April 2017, the growth in key petroleum products was around 12 percent year-on-year and 11 percent month-on-month. However, significant growth has been witnessed in furnace oil volumes and hence imports, followed by HSD in Aril 2017. This was led by increased demand for furnace oil from power producers and diesel for running tractors during the wheat sowing season; April is usually the beginning of Kharif sowing season that drives the demand for HSD consumption by tractors. Moreover, with power shortages already witnessed, increase in furnace oil consumption by the power sector is also no misnomer.

Oil prices rebounded in 2016. However, since the beginning of 2017, oil prices have retreated again. And the government has recently decided to keep price of petroleum products intact and not pass on the benefit to the consumers in order to meet the shortfall heralded in the revenue collection. This could partly act as a restricting factor in the volumetric growth of the petroleum products.

Otherwise, the outlook for the OMC sector remains sanguine as construction activities continue as well as the automobile demand remains optimistic. And with the summers already on the horizon, furnace oil too will likely remain a key growth factor in overall petroleum sales.