Domestic oil sales plunge by 35 percent in April

KARACHI: The domestic sales of petroleum products have plunged by 35 percent to 1.07 million tons in April 2020 as compared with 1.65 million tons in the same month of the last year.

However, the sales in April 2020 increased by three percent when compared with 1.03 million tons in March 2020.

Analysts at Arif Habib Limited attributed the increase in sales of petroleum products to: 1) Surge in sales of HSD on account of higher demand from agriculture sector given beginning of wheat harvesting season, and 2) Closure of Iran border resulting in lower availability of illegally dumped fuel.

Pertinently, sales of FO, MS and HSD witnessed a steep decline of 75 percent, 36 percent and 16 percent YoY to 0.07 million tons, 0.44 million tons and 0.55 million tons, respectively.

As per market sources, oil consumption witnessed a rising trend since the government opted for a ‘smart lockdown’ and issued Standard Operating Procedures (SOP) for construction and export oriented industries.

However, if lockdown is extended (deadline is May 09, 2020) then this will be negative for May 2020 sales.

On a monthly basis, MS sales dropped by 21 percent MoM while HSD and FO volumes grew by 41 percent and 2 percent MoM respectively.

The analysts expect demand for furnace oil to increase in upcoming months due to higher demand of power in summer season coupled with historic low prices (FO touched USD 77/M.T on 22nd April’20) which may improve merit order of furnace oil based power plants.

During first ten months of current fiscal year, total White and Black Oil sales clocked-in at 13.35 million tons, depicting a decline of 13 percent YoY due to dip in sales volumes of MS, HSD and FO by 3 percent, 15 percent and 31 percent YoY, respectively.

Motor Gasoline sales witnessed a meager decline of 3 percent YoY to 5.99 million tons due to the Coronavirus. However, massive reduction in price will increase demand as customers will prefer petrol over Compressed Natural Gas (CNG). High Speed Diesel (HSD) sales shrunk by 15 percent YoY to 5.15 million tons led by i) Sharp slowdown in Agriculture sector, ii) Negative growth of 3.03 percent YoY in the manufacturing sector of LSM, and iii) Availability of smuggled HSD from Iran, which is cheaper in contrast to official imported product.

Meanwhile, FO is being replaced by other sources namely Coal, Hydel and RLNG, resulting in a decline of 31 percent YoY to 1.68 million tons compared to 2.44 million tons in SPLY.

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