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%).
