There is a visible slowing down trend in the consumption of key petroleum products. Volumetric sales by the oil marketing companies have trotted down in the first two months of FY19 (2MFY19). The main culprit has been the furnace oil, which came down by over 70 percent, year-on-year in 2MFY19. While the trend for furnace oil has continued to tread downwards for some time now (falling by 24 percent YoY in FY18), the downward slope in retail fuels comes as something new. Retail fuels have also lost steam as the decline in High Speed Diesel and Motor Gasoline stood at 29 percent and 7 percent year-on-year, respectively in 2QFY19.

The reason for falling furnace oil volumes is well documented as the country moves away from the expensive fuel to RLNG and coal. On the other hand, the decline in retail fuels somewhat came from holidays, be it Eid ul Azha or the independence day.

Moving onto the ensuing months, there is no good news for the OMCs on the furnace oil front; nothing is likely to change for furnace oil as the fuel will continue to face shrinking demand from the power sector as new coal and RLNG plants come online. This means that the firms will have to continue focusing on the retail side. Unfortunately, the growth in retail fuels has also slithered, which poses a challenge for the OMCs.

Other headwinds for the demand of retail fuels continue to be the exchange losses from currency depreciation and rising pump prices particularly for motor gasoline. Nonetheless, the oil marketing companies are likely to continue focusing on their retail expansion in terms retail outlets as they have little to choose from. While September might again have slower than average growth in retail fuel sales due to Muharram holidays, the slow down trend would solidify if the months following September also show signs of weakness.