Oil sales mirroring economic slowdown

With economy slithering, petroleum consumption is not showing any signs of a rebound. The decline in oil sales by the oil marketing companies has continued in 2020, with January official figures posting an overall decline of 13.4 percent year-on-year. This decline the highest for January in the recent history. The decline in January 2020 is led by 40 percent year-on-year decline in furnace oil and 11 percent year-on-year decline in high speed diesel, while petrol sales remained flattish during the month.

Overall. The 7MFY20 data for petroleum product sales by the OMCs depicts the same trend with furnace oil contracting by 23 percent and diesel sales falling by 9 percent year-on-year. motor gasoline or petrol sales however posted a growth of 5 percent year-on-year.

The staggering decline in furnace oil sales is not new as the fuel is largely being replaced in consumption by the power sector. However, the growth in January 2020 in furnace oil volumes on a month-on-month basis (88 percent) shows that the volumes recovered due to resumption of some FO –based power plants as well as some export of the petroleum product.

Whereas diesel sales contraction is definitely not a good sign. Not only does it show weaker transport demand but also lower industrial activity. Apart from that, weak HSD sales are also the result of product prices due to high petroleum levy, smuggling incidence and restricted demand in the agriculture sector linked to falling truck and tractor sales, as well as lower consumption in transporting FO.