Though there were no imports, a surge was seen in furnace oil sales last month (January 2019) amid increased consumption in the power sector due lower hydel power generation and lower RLNG imports. The figures seem to be back to (new) normal for furnace oil in February 2019, where the fuel saw a 31 percent, year-on-year and 52 percent month-on-month decline. Of the retail fuels, diesel sales in February 2019 remained flattish, while petrol volumes sold increased by 16 percent, year-on-year.
While the figures for volumetric imports for February 2019 aren’t available as yet, it is likely that no furnace oil was imported during the month as none was imported in the previous two months as well.
In 8MFY19, the overall petroleum product sales plunged by 27 percent, year on-year, led by FO decline of 60 percent, HSD decline of 20 percent and flat MS sales. The factors that have been driving these sales are the same.
FO is being phased out gradually and is used more by the power sector when other sources like hydel, coal or RLNG are not sufficient to meet the demand; HSD sales by the OMCs have to combat the smuggled fuel from countries like Iran as well as the ongoing slow economic activity that has affected demand from both the transportation sector and the agriculture sector; MS sales that seem to have peaked are now consolidating amid lower car sales and higher pump prices.
In the coming months however, higher demand from the power sector as summer season kicks in will increase FO demand and hence consumption by the power sector. On the other hand, HSD and MS are likely to remain subdued. Apart from the commencement of Rabi crop sowing season, which could have increased HSD sales in February 2019, what Optimus Capital Management highlights in its research note is the act of hoarding. Same goes for petrol where it has been highlighted that the recent tension between Pakistan and India has led to hoarding of these fuels by the dealers.
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