Pakistan’s oil marketing sector recorded total petroleum product sales of 1.28 million tons in Feb-26, reflecting a 13 percent year-on-year increase but a 15.4 percent month-on-month decline.
The divergence between the two trends is largely technical rather than structural — fewer working days in February and the onset of Ramadan dampened mobility and economic activity, while the year-on-year comparison benefits from a low base and measurably improved macroeconomic conditions.
Cumulatively, the eight-month period of FY26 (8MFY26) has seen total industry volumes reach 10.96 million tons, up 3.9 percent from 10.55 million tons in the same period last year.
Excluding Furnace Oil — whose secular decline continues — Ex-FO volumes for 8MFY26 grew a more robust 6 percent year-on-year, marking the highest February monthly level since 2022. These numbers paint a picture of a sector gradually recovering its footing after demand suppression driven by elevated inflation, currency depreciation, and macroeconomic instability.
Motor Spirit (MS) volumes were up 12 percent year-on-year in Feb-26 though down 3 percent month-on-month. For 8MFY26, MS sales incurred a 4 percent year-on-year increase.
The growth reflects a combination of recovering automobile sales, somewhat eased retail fuel prices (which has flipped in March), and improving consumer purchasing power as CPI inflation moderated to approximately 5.6 percent year-on-year by Dec-25.
High-Speed Diesel (HSD) was the standout performer on a year-on-year basis in February, rising 22 percent. However, HSD also registered the sharpest month-on-month decline at 21 percent, largely attributable to seasonal factors in the agriculture sector and a 6 percent jump in HSD prices during the month.
For 8MFY26, HSD volumes are up 6 percent year-on-year, partly supported by reduced smuggling of diesel from Iran, where border disruptions have curtailed informal cross-border flows.
Furnace Oil (FO) continues its structural retreat, falling 16 percent year-on-year and 57percent month-on-month Feb-26. For the full eight months, FO volumes are down 34% percent year-on-year to 305,000 tons. The combination of the Petroleum Development Levy and declining power sector demand has effectively accelerated FO’s exit from the energy mix.
The near-term outlook for Pakistan’s petroleum sector is materially complicated by the outbreak of the Iran-US conflict, which has pushed crude oil prices above $100 per barrel and triggered the closure of the Strait of Hormuz. For Pakistan — a net importer of petroleum — this creates a compounding challenge: higher crude acquisition costs, potential supply rationing, and the risk of emergency price hikes eroding the demand recovery that has been carefully building over the past year.
Mar-26 volumes are expected to contract as supply disruptions take effect. A recovery may follow in April, underpinned by the Rabi harvesting season, which typically generates strong HSD demand from the agricultural sector. However, the trajectory beyond that will depend critically on how quickly the geopolitical situation normalises and whether the SBP’s monetary easing cycle can continue to support economic activity and fuel demand in the face of imported inflationary pressure.
The structural tailwinds for Pakistan’s petroleum demand recovery remain intact: improving large-scale manufacturing, recovering automobile sales, crackdowns on smuggling, and a more stable macroeconomic environment. But the geopolitical shock serves as a reminder that Pakistan’s fuel import dependence is a persistent vulnerability — one that will continue to test the sector’s resilience in the months ahead.