Petroleum consumption in the country remains sluggish. The nation’s petroleum product sales stood at 1.22 million tons in August 2024, reflecting a 14 percent year-over-year decline. This decline can be attributed to several factors, including increased smuggling and the impact of the monsoon season. The resurgence of smuggled petroleum products from Iran exacerbated the situation, while higher-than-usual rainfall during August 2024 further dampened economic activity.
A product-wise breakdown of sales shows that all key fuels registered a year-on-year decline, with furnace oil (FO) leading the drop. FO sales plummeted significantly year-over-year due to reduced demand for FO-based power generation.
Among retail products, motor spirit (MS) sales dropped by 7 percent year-over-year. However, on a month-over-month basis, MS sales increased by 6 percent due to the resumption of activities, including the start of the school season and a reduction in petrol prices. High-speed diesel (HSD) volumes also slipped by 17 percent year-over-year, with the monsoon season playing a key role in the decline.
Overall, during the first two months of FY25 (2MFY25), total petroleum sales decreased by 12 percent year-over-year to 2.41 million tons.
This decrease reflects the continuation of trends observed in August, including lower economic activity and the impact of smuggling. Specifically, motor spirit and HSD sales were down by 8.5 and 11.7 percent year-over-year, respectively. Similarly, FO sales saw a steep 46 percent year-over-year decline.
Looking ahead, petroleum prices, which play a crucial role in determining oil demand in the country, will be influenced by global crude oil price movements. Key factors include OPEC+ plans to gradually phase out production cuts. FY25 may see some recovery in petroleum sales due to the low base effect from FY24 and potential economic revival.
However, this cautiously optimistic outlook could be jeopardized if the government fails to address the critical issue of petroleum smuggling across the Iranian border.
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