Driving the growth momentum in petroleum product sales, the retail fuels volumes are plateauing now. There is a visible slowing down trend in the consumption of key petroleum products since the beginning of FY19. Petroleum sales by the oil marketing companies (OMCs) for the last two months, September and October 2018 have been down by 17 and 32 percent, year-on-year respectively. OMC volumetric sales for the first four months of FY19 (4MFY19) for the three key petroleum products also stood lower by 32 percent, year-on-year.

Missing growth is quite visible in product wise sales; where furnace oil volumes have been dwindling, the overall volumes for 4MFY19 have also been pulled down by motor spirit and high speed diesel. Furnace oil off take for 4MFY19 decreased by massive 68 percent, while the import figures from OCAC show a decline of over 90 percent year-on-year for the fuel. HSD and motor spirit sales depict a decline 17 and 2 percent year-on-year, respectively, whereas imports of the same have tapered off by 30 and 3 percent, respectively. Even calendar year analysis shows similar trend. Sales of furnace oil and HSD have been down by 49 and 7 percent year-on-year, respectively in 10MCY18; whereas motor spirit sales remained stagnant.

For long, the main culprit for the decrease in petroleum sales has been furnace oil due to shifting of power generation from furnace oil to RLNG and coal-based generation. However, rising petrol and diesel prices, smuggles from Iran and adulteration are being quoted by the market as key factors for softening consumption on the retail side.

The OMC sector has come under pressure from stagnating volumes amid erupting cash flow concerns. PSO continues to face liquidity problems and falling furnace oil volumes. Among the key OMCs, APL is prone to least pressure due to its unleveled balanced sheet. Nonetheless, the volumes story in the ensuing months is bleak; no change is likely for furnace oil as the fuel will continue to face shrinking demand from the power sector. And while the sector has been focusing on the retail products, the slowdown in volumes, exchange losses from currency depreciation and rising pump prices will bite profit margins in the coming quarter.