Refinery sales decline by two percent on year-on-year basis

The overall refinery sales in the country declined by 2 percent on year-on-year basis to 4.991 million tons during the eight months of FY12. The major decline was witnessed in the sales of furnace oil that reduced by 11 percent to 1.411 million tons during this period.
On month-on-month basis, overall sales were down 11 percent, with decline witnessed in nearly all the products, including Mogas (down 14 percent), HSD (down 5 percent) and furnace oil (lower by 15 percent). "The trend was not specific to domestic refineries but was rooted in the overall petroleum consumption during the month, which went down by 7.5 percent while imported products were also lower by 5 percent, showing dampened demand as well as supply-related issues pertaining to the notorious circular debt", Farhan Bashir Khan, an analyst at InvestCap said.
As such, higher oil prices coupled with rise in petroleum product prices have aggravated the matter. Among leading benchmarks, Arab Light crude price rallied by 5 percent on average basis during February 2012, while it is currently higher by 17 percent compared to December 2011 closing.
ATRL and NRL posted decline of 2 percent and 12 percent in overall sales on year-on-year basis while their supply was also lower by 17 percent and 15 percent on month-on-month basis, respectively. However, despite lower sales, the refineries managed to improve their sales mix with better sales of HSD relative to loss-making furnace oil.
With the nation's largest refinery Parco under a scheduled 30-day maintenance shutdown (mid-March to mid-April), overall refinery sales is expected to be scaled down further in March-April period. During the eight months of FY12, Parco contributed 41 percent to the total refinery sector sales (up from 35 percent last year). The largest refinery also provides 50 percent of total refinery Mogas sales, 38 percent of FO sales and 40 percent of HSD sales. Still, being a scheduled turnaround, supplies might not be immediately affected with the deficit being met through imports, though the same will affect country's import bill during the period.
"Though refinery margins have come down in March 2012, we see the same still better-off on quarter-on-quarter basis", he said. Meanwhile, ATRL is still expected to reap the benefits of better yields, he added. On the other hand, fuel margins for NRL have taken a sharper dip. As far as lube segment is concerned, base oil prices continue to stay weak, with only minor improvement was seen in preceding weeks. Against a sharper rise in crude price, lack of interest in the base oil markets would keep margins for NRL under pressure, he said.