The OMC sector is in gloom; volumes are shrinking and there is no respite in sight. Economic slowdown is the main cause; demand is waning as industrial activity is at a standstill amid high inflation and interest rate environment.

For February 2020, the total volumetric sales are down by 22 percent year-on-year to the lowest in at least a decade. And for the first time, the decline is not led by any seasonal consumption change or the ongoing phasing out of furnace oil. It is the high-speed diesel consumption – an indicator of economic activity in the country – leading the decline in February 2020 sales, also down to its lowest level in more than a decade by 36 percent year-on- year.  Furnace oil sales are down by 16 percent, whereas the motor gasoline volumes that have continued to see growth, are also down this month by 11 percent, year-on-year.

The slowdown in economic activity is clearly visible in a month-on-month downward sloping trend. Apart from falling FO volumes (though the fuel witnessed a slight uptick in the January 2020 due to falling international prices), HSD volumetric sales are falling continuously since Oct-19. MS sales have also started its downward trajectory since the beginning of 2020.

The aggregate volumes for 8MFY20 fell by 22 percent versus 8MFY19 volumes, leading to 22 percent decline in FO sales, and 12 percent decline in HSD volumes.  According to a research note by AKD Securities, faltering macros particularly weak industrial, transport and power demand have been constraining volumes. Global crude oil prices have plummeted due to the corona virus (CONVID-19) threat, which should ring alarm bells as the research note also points to a possibility that oil companies have been holding off sales to minimize inventory losses in the weak international price backdrop.