2019 began on a weaker note for the petroleum products as the volumetric sales continued their slow pace. Overall petroleum products by the oil marketing companies dropped by 29-30 percent year-on-year in 7MFY19, primarily pulled down by furnace oil, which was down by 62 percent. However, year-on-year volumes show slowdown in all products; diesel and petrol sales also didn’t help; HSD and MS were down by 22 and 2 percent, year-on-year respectively.

Clampdown on furnace oil has started showing in petroleum products’ import finally. None has been imported in the last two months, and its share in total petroleum product sales has come down from around 65 percent in 7MFY18 to 15-16 percent in 7MFY19.

But that doesn’t mean that furnace oil is out of the picture. The illustration shows that the furnace oil volumes (sales by the OMCs) were up again in January 2019. Higher off take of local furnace oil might have unclogged some of the stockpiles that the local refineries were building as power companies resorted back to the fuel amid declining hydel production, hydel plants undergoing maintenance and lower RLNG imports.

On the other hand, retail fuels also saw a decline in demand due to lower demand by the transport sector, slower economic growth, declining car sales and smuggling of diesel.

The outlook for the OMC segment is not very robust at the moment, though the payment of Rs200 billion to clear the circular debt will ease some liquidity. The sector headwinds include the exposure PKR/USD as a large portion of the product is imported; also increased competition can lead to reduced margins. However, hydel generation is likely to pick up in the wake of the ongoing rains across the country, and numbers for February will depict that in FO sales.