Apart from the seasonality factor, the increase in month-on-month volumes for HSD and furnace oil was also due to some recovery in September in transportation activity and increased power generation, respectively; while motor gasoline increased modestly by 2 percent. While September 2019 figures for overall volumes sold by the oil marketing segment were up by 16 percent month-on-month, they remained down by 15 percent year-on-year where all three key petroleum products witnessed contraction. The largest decline was that in furnace oil and high speed diesel where both declined by 23 percent.

There is nothing to write home about overall petroleum products sales in 1QFY20. The OMC volumes continue to decline due to demand and consumption decline amid economic slowdown. For furnace oil that fell by 15 percent year-on-year, the demand contraction continued to come from the power sector as FO is being replaced by other fuels like LNG and coal, and the month-on-month growth in FO off take in the last couple of months is only temporary; this can also be seen from increase in furnace oil imports in summer months versus none in the previous months (data for import volumes only available till June 2019).

On the other hand the diesel volumetric growth that is associated largely with economic and industrial activity also continued its previous down cycle trend, falling by 15 percent year-on-year as well. What has further hampered volumetric growth for HSD has been the smuggling of diesel across the Iranian border.

Motor gasoline volumes that depicted a tepid growth of 2 percent year-on-year in 1QFY20 have also been showing no signs of significant recovery over the past many months, though petrol volumes have been the only one of the three key fuels to post growth.

While there has been some respite in month-on-month sales in September 2019, no significant rebound is expected in the near future as domestic diesel will continue to be hit by cheaper smuggled Iranian diesel unless strict action is taken to address the porous borders; FO will continue to see disintegration as new power capacities on coal and LNG are expected to come online; and MS will also not pick up pace amid increasing petrol prices with no price reversal in sight.