Showing posts with label speed diesel. Show all posts
Showing posts with label speed diesel. Show all posts

Thursday 6 April 2023

Pakistani OMCs face doom and gloom


Sales of oil marketing companies in March 2023 dipped to 1.1 million tons, a fall of 9%MoM and 39%YoY basis. The decline was led by high speed diesel (HSD) and furnace oil (FO). This is the lowest monthly offtake number since April 2020 (1.068 million tons), when Government of Pakistan (GoP) resorted to lockdowns in a bid to contain the spread of COVID-19.

The decline can be mainly attributed to significant price hikes in motor spirit (MS) and HSD over the previous two months, taking prices during March to PkR272 and PKR293 per liter respectively.

The said fall to 35 month low can also be attributed to demand destruction, as POL sales volumes are correlated with an overall economic slowdown, depicted by falling industrial activity, falling power generation, shock in the auto sector and the unprecedented wave of inflation that has gripped the economy.

Overall, total POL sales remained down by 21%YoY during 9MFY23, to 12.8 million tons as compared to 16.2 million tons during the same period a year ago.

Product wise, HSD sales were down 43%YoY and FO offtake was down 70%YoY), as muted industrial activity and power generation. FO based generation declined 51%YoY during 8MFY23.

Analysts expect increased HSD offtakes in the upcoming Kharif season (April-June), although, with fuel prices on the rise, it is expected to be an expensive affair for farmers, and may even be riddled with fuel shortages like last year where diesel shortage hit sowing/harvesting farmers in Punjab as they queued up at filling stations, being wary in anticipation of monsoon season in May/June. The ongoing wave of inflationary pressures has also gripped the economy and has resulted in consumers choosing to avoid leisurely travel amidst reduced purchasing power.

It is worth mentioning that the prices of both MS and HSD have risen to PKR272 and PKR293 per liter, respectively.

These prices represent an increase, in line with the current government's plan to pass on the full cost of supply and levies to consumers.

Company wise, major players in the sector, PSO/APL/SHEL/GOPL, delivered throughput levels of 535,000/113,000/89,000/58,000 tons, taking total market share to 48.4%/10.2%/8.2%/5.3% for March 20223, respectively.

To note, PSO’s offtakes remained worse off, down 44%YoY, mainly due to dampened FO demand, down 92%YoY as compared to an industry-wide decline of 70%YoY.

More specifically, country’s largest OMC saw its retail volume fall by 12%MoM/36%YoY. Furthermore, HASCOL emerged the most resilient amidst the industry decline as total volumes for the month were reported at 43,000 tons, up by 60%MoM. This comes on the back of HASCOL’s approach to remobilize most of its retail depots by CY22 end, as most closed up due to company’s fallout back in CY20.

On the retail front, PSO and APL ended the 2QFY23 period with market share standing at 49.1%/8.5% as compared to 47.0%/8.3% during SPLY.

With only a quarter left during the year – the demand for petroleum products hasn't looked this bad in years since the Covid’19 pandemic struck. Overall, the broad based economic slowdown continues to haunt the sustainability of the sector as risen prices and dampened industrial/commercial activity have kept offtakes under pressure.

On a forward looking basis, rampant inflationary pressures in the coming quarters alongside a depressed GDP outlook during the year period compels us to assume negative volumetric growth for the industry, by approximately 20-21% for FY23 (previous 15%).