There was a slight increase of 8%MoM) due to rumors of a potential price hike, which may have prompted some hoarding. Overall, total POL sales remained down by 19%YoY during 7MFY23, reported at 10.5 million tons as compared to 12.9 million tons for the same period last year.
The decline is largely due to a drop in organic demand, as petroleum sales tend to be closely tied to the overall health of the economy. This is evident by a 3.6% decline in LSM activity during June-November 2022, a 8%YoY drop in power generation during the 1HFY23, and a 41%YoY decrease in auto sales during the same period. The ongoing wave of inflationary pressures has also gripped the economy and contributed to the overall reduction in purchasing power for the spending public. Furthermore, the volumetric downturn may also be due to suspended travelling along the motorways due to fog, reducing heavy transport mobility during the month, as depicted by fall in HSD offtakes, down 21%YoY during January 2023).
Also, lower FO based generation during the recent months, down 89%YoY during January 2023, keeping fuel oil offtakes down by 45% during January 2023.
On the retail front, MS volumes shrunk noticeably as well, by 13%YoY during January 2023, as increased fuel prices and reduced mobility during winters dampened the overall demand. It is worth mentioning that the prices of both MS and HSD were raised by PKR35/liter each during the latest price notification, bringing them to PKR250 and PKR263 per liter, respectively. These prices represent an increase of 69% and 84% as compared to February 2022; in line with the current government's plan to pass on the full cost of supply and levies to consumers (PDL was PKR50/PKR40 per liter for MS/HSD)
Company wise, major players in the sector reporting sales at PSO (704,000), APL (140,000), SHEL (115,000 and GOPL (85,000), taking total market share to stand at 49%/9.7%/8.0%/5.9% for January 2023, respectively. More specifically, APL’s offtakes witnessed the strongest recovery on a MoM basis (up 16% as against industry average of 8% during January 2023) majorly due to a big spike in RFO offtakes, up 84%MoM.
This may be due to increased offtakes from the power plants the company sells to in Punjab (Attock-Gen, NPL, NCPL etc.), as depicted by recent upticks in RFO based generation during December 2023 (up 267%MoM), amidst recent RLNG scarcity in the country. On the retail front, PSO and APL ended the 7MFY23 period with market shares of 49.0% and 8.4% as against 46.9% and 8.3% during the same period last year.
AKD Securities conclude that for the first month of 2HFY23 the demand for petroleum products hasn't looked this bad in years as compared to the last two fiscal years. Overall, increasing fuel prices continue to haunt the sustainability of the sector as risen prices and dampened macros have kept offtakes under pressure. Furthermore, recent news flows suggesting oil/petroleum shortage amidst stringent LC/exchange rate volatility may add further fuel to the fire to the declining health and sustainability of the OMC sector.
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