Petroleum sales: Furnace oil is fast being replaced by other fuels like LNG, coal and others; so has been the petroleum sales narrative for the past year or so. Also, the OMC sales have been treading down as the economic activity and growth in the country slows down. The latest numbers from OCAC for the monthly oil sales by the oil marketing companies for May 2019 show that overall the growth remained negative on a year on year basis at -31 percent, while on a month-on-month basis, it only grew by one percent. A look at the top three petroleum products (FO, MS and HSD) show that the sale of these by the OMCs fell by over 33 percent, year-on-year, while on a month-on-month basis, they remained static.
With only one month left in the close of the fiscal year, the trend in the sales of these petroleum products is vivid. For 11MFY19, the key petroleum products together came down by 25 percent year-on-year led largely by furnace oil sliding by 58 percent, year-on-year, flowed by 20 percent decline in high speed diesel. Motor spirit (petrol) sales volumes remained flat. So in essence, all three petroleum products contributed to the growth in OMCs sales volumes where furnace oil sales were down due to the ongoing scaling down of the fuel and its demand by the power sector; diesel sales were weaker diesel sales, petrol too due to minimal industrial transportation and activity in the country since the new government took charge along with increased smuggling along the Iranian border; and slowdown in the petrol consumption against a growth of over 10 percent in 11MFY18 due to higher prices and eroding consumer purchasing power.
While May was weaker also because of Ramadan falling in this Gregorian month that affected the overall consumption of the petroleum products, the coming months are likely to continue the weak trend in OMC petroleum volumes despite the higher diesel sales due to increased agri demand coming from the ongoing harvesting and crushing season; or the likely increase in furnace oil sales and imports due to higher demand by the power sector. However, exactly how much furnace oil is being imported has not been updated on OCAC’s website for the past two months.
As for LNG where many are eyeing a growth, Imposition of 5 percent FED on LNG proposed in the budget will likely push up CNG prices as CNG is among the key sectors that receive RLNG. Moreover, taxes on CNG have been rationalized; and CNG prices to the dealers be increased from Rs64.80 per kg to Rs74.04 per kg for Region I, and from Rs57.69 per kg to Rs69.57 per kg for Region II.
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