Petrol, diesel consumption surge

KARACHI: Lower prices are driving demand for petrol and diesel, as car owners take advantage of cheaper oil after its sales posted a five percent increase in August to 1.81 million tons against 1.71 million tons in July 2015, official data suggested on Thursday.
However, these numbers only depict sales by oil marketing companies and not the actual consumption, as a significant amount of petroleum products are smuggled into country from Iran.
"Around 8-10 tons of smuggled petroleum products mostly diesel find their way into the country every day,” an official of the anti-smuggling enforcement agency said.
The official said unscrupulous elements in connivance with the staff of some oil marketing companies distributed the smuggled commodity.
"Mostly, these products are sold at unregistered fuel stations and roadside stalls in a highly unsafe manner."
Declining prices and limited availability of compressed natural gas (CNG), particularly in the Northern regions, has increased the demand for petrol, as depicted by a massive 41 percent MoM jump in sales to 0.46 million tons in August.
"This was mainly led by a healthy eight percent and six percent increase in motor spirit and high-speed diesel (HSD) demand, respectively," Shahbaz Ashraf at Arif Habib Limited said.
"We expect this strong demand momentum to continue ahead, as declining prices are expected to take petrol demand up in FY16," Ashraf added.
Furnace oil consumption exhibited a two percent rise during August to 0.27 million tons. However, on YoY basis, the industry sales were down three percent.
For July, August of FY16, petrol sales grew by a massive 35 percent. But, this was largely diluted by a 12 percent and 23 percent fall in diesel and furnace oil volumes, respectively.
An official of the oil marketing companies said that there was a preference for petrol cars, as the price difference between the two fuels, petrol and CNG, had come down to nominal.
"The population of car and bike users is growing, which is evident from the rising sales of cars and motorbikes. Hence, the demand for fuel, particularly petrol is rising," the official said.
Declining prices along with a ban on the usage of CNG in public transportation across the country inched up diesel sales by six percent MoM, and one percent YoY to 0.55 million tons in August.
In addition, transportation activity also increased in August after floods.
"Going forward, we expect diesel demand in FY16 to record around six percent increase."
Despite lower furnace oil prices, the consumption remains subdued as the oil marketing companies are reluctant to supply fuel on credit to the power sector due to continued liquidity constraints and delayed cash flows.
FO volumes recorded a drop of 20 percent YoY in August on the back of higher electricity generation on hydel.
One of the emerging players, Hascol has managed to increase its market share to seven percent during 2MFY16 as compared to five percent in the same period last year, while all other OMCs lost their market share by bits.
Meanwhile, the International Energy Agency (IEA) on Thursday raised its forecast for global oil demand growth in 2015, attributing the boost to the lower prices, economic recovery and a relatively cold winter.