Domestic Sales of High-Speed Diesel Falls by 9% Due to Smuggling of Iranian Oil

Domestic Sales of High-Speed Diesel Falls by 9% Due to Smuggling of Iranian Oil

Karachi, August 2, 2023 – Domestic sales of high-speed diesel (HSD) in Pakistan have experienced a sharp decline of 9 percent in July 2023, primarily attributed to the rampant smuggling of Iranian oil into the country, according to analysts at Topline Securities.

The total sales of HSD reached 494,000 tons in July, marking a significant decrease from the previous month. The illicit smuggling of Iranian oil has been cited as the main reason for this downturn in the energy market, as it continues to negatively impact the legitimate sales of locally refined high-speed diesel.

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However, despite the recent decline, the year-on-year figures show a positive trend, with HSD sales witnessing an 11 percent increase compared to July 2022. This growth is largely driven by a surge in demand from the rice and cotton harvesters, who rely heavily on diesel-powered machinery during their peak seasons.

Overall, Pakistan’s oil sales for July 2023 stood at 1.35 million tons, reflecting a 6 percent year-on-year decrease and remaining relatively unchanged compared to the previous month. However, if Furnace Oil (FO) sales are excluded, the overall oil sales amounted to 1.2 million tons, showing a 10 percent year-on-year increase but a 3 percent month-on-month decline.

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The sale of Motor Spirit (MS) or petrol, experienced a 2 percent month-on-month growth, reaching 656,000 tons in July 2023. This increase is largely attributed to the seasonal effect of Eid holidays and summer vacations, which typically drive up domestic travel and consumption.

In contrast, Furnace Oil (FO) sales for July 2023 recorded a staggering 59 percent year-on-year drop, reaching just 144,000 tons. However, there was a 44 percent month-on-month increase in FO sales due to higher demand for power generation during this period.

Among the listed entities, Pakistan State Oil (PSO) reported a 5 percent year-on-year decline in sales to 678,000 tons for July 2023, primarily caused by significantly lower sales in Furnace Oil (FO) which experienced an 82 percent year-on-year decrease.

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Similarly, Shell Pakistan (SHEL) and Attock Petroleum (APL) also faced a decline in sales. SHEL’s sales dropped by 3 percent year-on-year to 94,000 tons, while APL’s sales declined by 5 percent year-on-year to 132,000 tons.

In terms of market shares, PSO maintained its position with a market share of 50 percent in July 2023, unchanged from the previous year. However, it increased from the 48 percent market share recorded the previous month. Shell Pakistan (SHEL) secured a market share of 7.0 percent in July 2023, up from 6.7 percent in July 2022 and 7.1 percent in June 2023. Attock Petroleum (APL) held a market share of 9.8 percent in July 2023, compared to 9.6 percent in July 2022 and 11.2 percent in June 2023.

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The analysts predict that the recent increase in petrol and diesel prices by Rs20 per liter each, raising them to Rs272.95/liter and Rs273.40/liter respectively, will likely put some pressure on demand in the upcoming month.

The government and authorities are expected to continue their efforts to curb the smuggling of Iranian oil into Pakistan and stabilize the energy market to ensure steady domestic sales in the future.