Furnace oil sales by oil marketing companies managed to recover after the government bailed out the power sector in June last year. The temporary pain relief for power sector improved furnace oil sales that accounts for around 50 percent of the total oil sales by the OMC sector.
However, as circular debt resurged during FY14, furnace oil sales, which are mostly to the power sector, have started suffering once again. In short, furnace oil volumes remained volatile during FY14. The fuel witnessed an overall growth of 12-13 percent year on year during FY14 and also during June 2014 alone, whereas on a sequential basis, it declined by 2 percent in June.
While furnace oil sales remained unpredictable during FY14, the other major petroleum product, motor gasoline (petrol) acted quite opposite. Fuel sales continued to show growth and the curtailment of Compressed Natural Gas (CNG) and electricity load shedding played the key role here. With June volumes touting a growth of 13 percent year on year, motor gasoline observed a rise of 15 percent year on year during FY14.
Now that the harvesting season is over, High Speed Diesel (HSD), the third major fuel, is back to its low levels, dropping by 36 percent month on month; the fuel witnessed a surge in consumption during May 2014 due to late harvesting season and is now back to almost the same level as April 2014.
Last time when BR Research commented on petroleum sales by oil marketing companies (See: ‘Uncertainty stalks future petroleum sales’, June 17, 2014), it clearly mentioned that rising circular debt has started haunting petroleum sales particularly that of furnace oil. When circular debt rises, power generation decreases and the fuel suppliers like PSO, APL and Shell suffer. So while motor spirit and HSD might not be affected, furnace oil sales will continue move in tandem with the circular debt.
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