Petroleum sales by the oil marketing companies in 1QFY21 ended up 10 percent year-on-year higher despite the slowdown brought by the coronavirus pandemic. The slow growth has continued especially in the industrial sector along with the monsoon induced weakness in the agriculture sector. Overall, the oil sales have been led by the black oil – furnace oil, while the white oils or the retail fuels are seen taking it slow. Furnace oil consumption during the first quarter of FY21 (July-September) has grown by 28 percent year-on-year, while the other two key petroleum products – Motor Spirit (petrol) and High Speed Diesel (diesel) sales increased by 10 and 8 percent year-on-year, respectively.
Of the three months, September 2020, however, has been the weakest as overall OMC volumes sold during the month remained flattish at two percent year-on-year growth. In terms of products, the trend of rising furnace oil consumption continues as the fuel sales increased by 58 percent year-on-year. On the other hand, HSD sales dropped by 14 percent and MS volumes too dipped slightly by 1 percent, year-on-year in September 2020.
The growth in furnace oil sales by the oil marketing companies after a period of lull has been seen since at least mid-2020 due to rising consumption in the power sector once again. The resurgence of furnace oil can be seen from the continuous month-on-month increase since June 2020. While summer season usually witnesses growth in furnace oil because of increased demand - despite its countrywide phaseout plans. However, this time the increased usage might not take a pause in winter months as severe gas shortage as well as limited RLNG availability in the offing would force the power plants to run on furnace oil.
The slowdown in retail fuels is partially being attributed to the opening of the borders that has once again increased the incidence of smuggling, particularly diesel. Also, the monsoon rains have acted as factors in curbing demand of the fuel. The flattish petrol sales in September 2020 could only be explained by the fact that the petrol sales are now normalizing after the abnormal growth seen in petrol sales in the three months from June till August 2020, because otherwise the consumption of petrol is definitely more today than during the different kinds of lockdowns. Or it could be that the intercity travel has seen some decline now that the domestic air travel is back into operations, but this might not be a plausible reason as jet fuel offtake continues to be depressed – down by 59 percent year-on-year in September 2020.
Going forward, FO is likely to remain elevated in the wake of an acute gas shortage this winter. While the retail fuels might continue to post flattish growth due to increased smuggling as well as fears of a second wave of Covid-19 that could mean noticeable decline in case lockdown is imposed once again.