Petroleum product sales by the oil marketing companies have fallen by 32 percent year-on-year in November 2018, and the overall industry sales for 5MFY19 have slipped by 33 percent year on-year as well. While previously furnace oil has been the key reason for faltering oil sales, the slowdown has been accompanied by slower white oil sales for a few months now.
For November 2018, furnace oil sales decline by 70 percent year-on-year, while sales for 5MFY19 and 11MCY18 nosedived by 68 percent, and 50 percent, year-on-year respectively amidst the shifting of power generation to RLNG and coal.
On the other hand, high speed diesel (HSD) and motor gasoline (or petrol) also witnessed squeeze in sales by 32 percent, and 8 percent, respectively in November 2018, and 20 percent, and 3 percent, respectively in 5MFY19.
There are multiple reasons for the slowdown in retail fuels. HSD consumption tanked due to higher prices as well as smuggling from Iran, whereas petrol sales have started consolidating due to higher petrol prices. Apart from these factors, supply chain constraints and refinery disruptions where furnace oil storage volumes is full, are reasons of huge concern.
The furnace oil uplifting issue from local refineries has created a crisis, which can gain momentum fairly quickly if it remains unaddressed. Despite huge stockpiles and full storage, furnace oil was imported in October 2018, leaving local refineries crying for upliftment.
This happened despite the ban on furnace oil imports, which has again been imposed by the new government.
Moving forward, the petroleum product consumption is likely to remain slow ahead of the winter season’s squeeze on electricity demand. At the same time, the retail fuels will also continue to remain out of the limelight as currency depreciation takes a toll on ex-refinery prices.
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