KARACHI: The Oil Companies Advisory Committee (OCAC) has advised the government to review petroleum prices on fortnightly basis instead monthly basis.
In a letter to Secretary Petroleum, the OCAC said that due to the declining petroleum products prices experienced in February and March 2020, the whole downstream oil industry was facing uncertainty and financial exposure.
“As a consequence, upliftment from refineries and Oil Market Companies (OMCs) depots is depressed when there is also a huge trading exposure in imports,” it said, adding that needless to mention, the losses incurred and being incurred by oil industry due to fluctuation of Pak Rupee/ US Dollar parity is also over and above the pricing exposure.
“In light of above to mitigate the situation in weeks and months ahead so as to avoid any undesirable situation in terms of imports shyness and availability of petroleum products, we proposes to switch the frequency of petroleum products pricing from monthly to fortnightly basis and if further needed to weekly basis.”
It is pertinent to mention that fortnightly prices have also been successfully implemented in the past, the OCAC said.
Recently, analysts at Topline Securities revised down earning forecast for Oil and Gas exploration companies over FY20E-22F by 18-33 percent due to: downward revision in international oil price assumption; incorporation of lower-than-expected 1HFY20 results; and likely delays in production from few fields mainly for MARI.
The Energy Information Administration (EIA) has downward revised their oil price forecast by 33 percent and 13 percent to US$43 and US$55/bbl for 2020E and 2021F, respectively in the aftermath of deadlock over production cuts between OPEC and allied countries (mainly Russia). Saudi Arabia announced price discounts and production increase to 12.3mn bopd (current 9.8mn bopd) from Apr 2020 onwards.
To note, crude oil prices (Arab Light) are down 46 percent to US$37/bbl since Dec 31, 2019.
Concerns over epidemic Corona Virus Disease (COVID) is also weighing down on the global growth outlook and subsequently on oil demand. OPEC in its recent Mar 2020 report (released on Mar 11) has revised down World GDP growth target to 2.4 percent vs. earlier 3.0 percent for 2020.