Petroleum sales have picked up month-on-month - starting FY20 on a better note for the oil marketing companies. But this increase is short-lived and too early for lifting hopes for FY20 is another reality. Looks like those highlighting the month-on-month growth in volumetric sales of the OMCs forgot to read the declining year-on-year growth as well as an array of depressing factors. The downward trend in petroleum consumption has hit the oil marketing sector hard. And that too during volatile times – be it the currency losing its value, oil prices fluctuating, or the economic activity remaining dull.
While the overall petroleum sales in July 2019 increased by 13 percent month-on-month, the decline was evident at 6 percent year-on-year. Furnace oil demand has been falling particularly from the power sector, while the diesel volumetric sales are paying the price for the increasing inflow of grey product from the Iranian borders.
Motor gasoline sales have been cooling down as well as economic activity, falling car sales and rising ump prices do their job in controlling consumption. The story is the same.
A look at 7MCY19 data also depicts the same trend in a much bigger magnitude; furnace oil and HSD came down by 43 and 17 percent, respectively while motor gasoline showed a growth of only 3 percent, year-on-year.
No immediate change in consumption patterns is expected in the coming months – except for maybe the decline in furnace oil volumes as demand for power generation cools down with peak summer months over. This would push volumes further down. The support lent by petrol volumes to the overall growth can also derail as increased prices and the likelihood of further increase will affect demand. A rebound is definitely not in sight.
What makes little sense here is that while furnace oil volumes have been seen to pick up in recent months to address the rising power generation demand in hot weather across the country, PSO and SNGPL have reportedly raised the issue of lower gas off take (which could damage the gas network) by the power sector apparently on lower demand for power generation. If that’s how it is, the authorities should be ready for an explanation.
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