Petroleum consumption on the rise

Apart from the revival of economic activity in FY21 so far, two factors in April have been the driving force behind the growth in petroleum consumption and sales by the oil marketing companies. First is the low base of last year when the country was in lockdown with minimal movement and economic activity; March 2020 was the first month of noticeable increase in Covid-19 infection in Pakistan as well as the beginning of restrictions that led to significantly low demand for oil and petroleum products and April was no different. And the second is the agricultural activity as well as business activity ahead of Ramzan.

Usually, economic activity slows during Ramzan, which slows the petroleum consumption in general. However, it can bee seen that in April 2021, petroleum product sales by the oil marketing companies have increased by 18 percent month-on-month. Key contributors in April 2021 month-on-month growth were highspeed diesel that grew by almost 50 percent as April was the month of wheat harvesting.

On the year-on-year basis, oil sales by the OMCs took a gigantic leap of over 57 percent; compared to the sales in April 2020 of a little over 1 million metric tons for furnace oil, diesel and petrol, volumes sold in April 2021 were over 1.64 million metric tonnes. The growth in all three key petroleum products was staggering - led by furnace oil and followed by petrol and high-speed diesel.

In 10MFY21, petroleum product sales grew by 19 percent year-on-year, which was primarily led by furnace oil; FO sales by the OMCs saw a jump of over 2.5 times due to increased use in the power sector. On the other hand, petrol and diesel too witnessed double-digit growth. Factors like economic recovery driving retail fuel sales, increased LSM and trading activity and agriculture growth driving diesel sales as well as curb on illegal fuel from Iran driving HSD sales, and mounting automobile sales driving petrol volumes have been defining the trend seen in OMCs volumes. Plus, the gas shortage in the country has brought back furnace oil in the mix, which will be key in lifting growth in the summer months.

While the growth is likely to pick up in the medium term, the current third wave of covid infection and the ensuing restriction might bring some slowdown to volumes in the following couple of months.