KARACHI: Pakistan’s retail oil market is projected to grow by 13 per cent to Rs167 billion in FY26, well above the average 4.0 per cent annual growth seen over the past five years.
Retail fuel sales, which peaked at 24.4 billion litres in FY22, have since declined by around 24 per cent to 18.5 billion litres in FY25, due to sharp price hikes under the IMF programme and sluggish economic growth averaging 1.6 per cent in FY23-25.
“With oil prices stabilising and financing costs falling, major oil marketing companies (OMCs) are well positioned to expand their market share in FY26, supported by strong margins and storage infrastructure,” said Farhan Mahmood, head of research at Sherman Securities.
In FY25, petrol and diesel sales grew 3.0 per cent YoY, while per-litre OMC margins on these regulated fuels averaged Rs7.9, largely unchanged from the previous year.
Industry officials said global players continue to eye Pakistan’s retail market, but falling international oil prices over the past four years have led to inventory losses, pushing some smaller OMCs out of the market. The influx of smuggled Iranian fuel via border regions has further depressed volumes.
However, with government efforts now focused on curbing fuel smuggling -- estimated to cost the exchequer Rs200 billion annually -- retail sales are expected to rebound.
“We expect 13 per cent growth in FY26, driven by volume recovery and a projected 2.0 per cent increase in OMC margins,” said Mahmood, adding that growth could reach 19-20 per cent if the government approves a proposed 15 per cent margin hike in the second half of the fiscal year.
Mahmood also said that Pakistan State Oil (PSO), which has suffered significant inventory losses in recent years, should see improved performance. “We anticipate PSO’s retail segment to do well in FY26, while its LNG business is expected to recover, lowering finance costs from Rs33 billion in FY25 to Rs23.5 billion,” he said. “Improved liquidity should allow the company to reduce its debt load.”
