Oil sector reports declining sales amid fuel prices surge

The Oil Marketing Companies (OMCs) experienced a downturn of 19% month-on-month (MoM) and 8% year-on-year (YoY) in February 2024, as per data compiled by AKD Research. 

Oil sales declined to 1.12 million tons in February 2024 compared to 1.38 million tons in January 2024 and 1.22 million tons in February 2023.

The downturn was particularly led by a reduction in Residual Fuel Oil (RFO) sales, which saw a decrease of 3% MoM and 11% YoY. The decline in RFO sales was primarily due to decreased demand for power generation and significant hikes in the prices of motor spirit (MS) and high-speed diesel (HSD) by Rs 12.5 and Rs 11.1 per litre respectively since early December 2023. 

These adjustments brought fuel prices to Rs 280 for MS and Rs 287.3 for HSD, marking increases of 4.6% and 4.0% compared to December 2023 prices.

This period’s performance marked the lowest sales figures in eleven months, indicating a seasonal downturn in demand for petroleum, oil, and lubricants (POL) typically observed in February 2024 due to lower working days. 

The aggregate sales data for the first eight months (July-Feb) of the fiscal year 2024 revealed a 13% year-on-year decline in total POL sales, with volumes dropping to 10.18 million tons from 11.69 million tons in the corresponding period of the previous year. 

Product-wise, the decline was most notable in furnace oil (FO) and HSD sales, down by 53% and 7% year-on-year respectively, showing the impacts of reduced industrial activity and reduction in power generation, with FO generation decreasing by 42.5% year-on-year during the first seven months of FY24.

Amidst the sector-wide downturn, Attock Petroleum Limited (APL) emerged as a standout performer, with a marginal 1.2% year-on-year decrease in total volumes, outpacing the industry’s 8% decline. 

APL’s retail fuel volumes experienced a 9% year-on-year growth, contrasting with the broader industry, where offtakes remained largely unchanged. 

Pakistan State Oil (PSO) saw declines in both total and retail volumes, with reductions in HSD (down 9% year-on-year) and RFO offtakes (down 19% year-on-year). 

HASCOL, on the other hand, reported a 19% year-on-year increase in total volumes to 253k tons, as the company worked to reactivate most of its retail depots, which had been closed due to dealer-network issues in CY20. 

The market share of smaller players in the sector (the bottom 25) increased to 11.5% from 8.8% in the preceding month.

As the fiscal year progresses, the sector is expected to contribute Rs 687 billion to the national treasury under the Petroleum Development Levy (PDL) through the first eight months, achieving 79% of the Rs 868 billion target for the ongoing fiscal year. 

This performance, driven by higher PDL allocations to fuel prices, suggests potential for exceeding the annual target, despite a 6% year-on-year decline in retail fuel offtakes.