Fuel shock shows up in OMC volumes

Oil marketing company sales came under sharp pressure in May-26, as higher pump prices finally began to bite into consumption. Total petroleum sales were down 23 percent year-on-year and 14 percent month-on-month. Excluding furnace oil, volumes were down 21 percent year-on-year and 7 percent month-on-month —the lowest May ex-FO volume since May 2013.

The weakness was broad-based, but diesel took the harder hit. High-speed diesel sales fell in May, down 32 percent year-on-year and 17 percent month-on-month. This is worrying because HSD is closely linked with goods transport, agriculture activity, and the broader movement of the real economy. Part of the decline reflects higher prices, but smuggling and slower economic activity also appear to have weighed on formal volumes.

Motor spirit sales were relatively more resilient, but only in comparison. Petrol sales were down 12 percent year-on-year while remaining almost flat month-on-month. The decline is still meaningful, especially considering that petrol is usually stickier due to urban commuting demand. Average petrol prices were around Rs402 per litre in May 2026, up 59 percent year-on-year, while average diesel prices were also above Rs401 per litre, up 57 percent year-on-year.

Furnace oil remained the most volatile category. FO sales fell by 64 percent year-on-year and 79 percent month-on-month. The sharp monthly fall reflects normalization after higher April offtake, along with availability of RLNG cargoes and higher hydel-based power generation, which reduced the need for expensive FO-based power generation.

The cumulative picture looks less weak, but only on the surface. In 11MFY26, total OMC were up just 1 percent year-on-year. Excluding FO, volumes increased 2 percent year-on-year to around 14.4 million tons. Petrol sales were up 2 percent, HSD was up 1 percent, while FO sales were down 17 percent.

The headline 11-month growth therefore does not point to a strong recovery. It mostly shows that earlier months had provided some support before the price shock became more visible. May’s numbers are a clearer signal of where demand may be heading if fuel prices remain elevated.

The outlook remains cautious. With global oil prices volatile, local fuel prices high, and household budgets already stretched, petroleum demand is likely to stay weak in the near term. Petrol may perform slightly better than diesel because people still need it for daily commuting, but non-essential travel could slow further.

HSD volumes remain the bigger concern, as sustained weakness would point to pressure on transport, agriculture, and broader commercial activity. FO will remain dependent on the power generation mix and RLNG availability.

For now, the OMC sales story is not one of growth. It is one of demand adjustment. The formal fuel market is absorbing the impact of high prices, weak affordability, and changing power-sector demand. Unless prices ease or economic activity picks up meaningfully, monthly volumes are likely to remain soft, even if full-year numbers still manage to look broadly flat.