Much has been talked about the cut in furnace oil consumption in the country recently. Furnace oil based power plants were halted for generation, but some of them came back online after clear resistance from the refineries and the OMCs as well as lower hydel power generation in the winter months.
The latest sales figures of the oil marketing companies bear testament to what happened to furnace oil. In short, ban on furnace oil based power plants, and hence their shift to gas suppressed the petroleum product sales in the last two months. Furnace oil sales for December 2017 stood at 431,000 tons, which was 44 percent lower, year-on-year. However, the month-on-month change was an increase of around 7 percent due to the comeback of some furnace oil based power plants.
Overall, the total industry volumes stood 11 percent year-on-year lower in December primarily due to lower furnace oil off-take despite growing volumes of retail products. Motor gasoline (petrol) and high speed diesel (HSD) volumes were up by 12 and 9 percent, year-on-year, respectively.
December figures closed the first half for FY18, and the trend was similar. Furnace oil sales were down by 14 percent year-on-year, while MS and HSD were both up by 13 and 11 percent, year-on-year, respectively in 1HFY18. And identical was the trend for CY17. For the full year ending December 2017, the growth was led by 7 and 12 percent increase in HSD and MS volumes while being dragged by 10 percent decline in FO sales.
These trends are likely to continue. This is especially true for furnace oil as its consumption is expected to taper down with new coal and LNG plants coming online, cutting FO’s demand. The retail fuels are seen to continue their growth trajectory albeit some slowdown. Where HSD volumes will be driven by strong growth in heavy vehicle sales, and ongoing CPEC infrastructural development projects, MS sales will be propelled by continued growth in car sales. However, the recent increase in petrol prices that came as a result of Rupee depreciation and the likelihood of a further increase given the rising oil prices and room for further currency depreciation can control demand to some extent.