KARACHI: The sales of oil marketing companies (OMCs) have increased by 19 percent on year-on-year and 9 percent on month-on-month basis to 1.62 million tons in June 2020 due to lower retail price in the country.
The OMCs sale was 1.35 million tons in June 2019 and 1.48 million tons in May 2020.
"Despite targeted lockdown in various areas of big cities and closure of some markets, this drastic increase in demand for petroleum products is due to revival in domestic economic activity. Three-year low in retail selling price resulted in hoarding to sell at higher price in July, backlog of order in anticipation of further decline in petroleum prices, surge in sales of HSD on account of higher demand from agriculture sector, massive reduction in price will increase demand as customers will prefer petrol over Compressed Natural Gas (CNG) and closure of Iran border to limit spread of coronavirus resulting in lower availability of illegally dumped fuel," Arsalan Hanif, an analyst at Arif Habib Limited, said.
Pertinently, sales of HSD and MS witnessed massive increase of 68 percent and 28 percent on YoY to 0.75 million tons and 0.73 million tons, while FO sales dropped by 59 percent on YoY due to lower reliance on power generation from FO based plants. Meanwhile, MS sales in June 2020 is the highest monthly sales in the country ever (20 percent higher than 11 months FY20 average of 0.60 million tons) while HSD sales stands at 24-month high (42 percent higher than 11 month FY20 average of 0.53 million tons).
As per market sources, white oil consumption registered historic high due to hoarding by some key players to benefit from rising oil prices (MS Ex-refinery price increased by 91 percent and retail price increased by 34 percent), he said.
"However, we believe volumes to drop in July due to higher price difference which may allow smuggled fuel to penetrate the market," he added.
On a monthly basis, MS and HSD sales grew by 14 percent and 10 percent on month-on-month while FO volumes plunged by 21 percent to 0.11 million tons. "We expect demand for FO to increase in upcoming months due to government allowing import of 0.2 million tons to meet demand of power plants coupled with benefit from low international FO prices which may improve merit order of furnace oil based power plants," he said.
During FY20, total white and black oil sales clocked-in at 16.38 million tons, depicting a decline of 11 percent on YoY due to dip in sales volumes of HSD and FO by 9 percent and 36 percent YoY, respectively. Despite surge in vehicle population and lower oil prices, motor gasoline sales remain stagnant at 7.35 million tons due to coronavirus outbreak resulting in slowdown in economic activity.
He said high speed diesel (HSD) sales shrunk by 9 percent on YoY to 6.59 million tons led by sharp slowdown in agriculture sector, negative growth of 8.96 percent on YoY in the manufacturing sector of LSM, and availability of smuggled HSD from Iran, which is cheaper in contrast to official imported product. Meanwhile, FO is being replaced by other sources namely coal, hydel and RLNG, resulting in a decline of 36 percent on YoY to 1.94 million tons compared to 3.01 million tons in SPLY.
During FY20, HASCOL has lost its market share from 10.4 percent in FY19 to 6.6 percent, which has directly benefited the largest oil marketing company, PSO. As a consequence, market share of PSO increased to 44.2 percent (monthly market share increased by 10.4 percent to 52.1 percent compared to 41.9 percent in May 2020) vis-à-vis 42.1 percent in FY19, respectively. On the other hand, total market share of SHELL and APL remained flat at 8.0 percent and 10.4 percent.
In recent price revision announced on 27th June 2020, the government increased prices of MoGas and HSD by Rs25.59/liter and Rs21.32/liter to Rs100.11/liter and Rs101.46/liter, respectively. This price increase is due to surge in international oil prices after revival of global economies resulting in higher demand for petroleum products.
During the period under review, ex-refinery price of MoGas and HSD increased by Rs21.87/liter and Rs18.85/liter. Meanwhile, the government decided to maintain petroleum development levy at previous level of Rs30/liter on MoGas and HSD to meet revenue targets.
Copyright Business Recorder, 2020
Comments
Comments are closed.