Oil sales drop 28 percent YoY in July-Feb FY19

KARACHI: Sales of oil marketing companies declined by 28 percent year-on-year in the July-February period of FY19, with a 61 percent decline in furnace oil (FO) offtake due to lower consumption in power generation, analysts said on Monday.

In February, the OMCs sold 1.43 million tons of energy products, lower by eight percent month-on-month, with the brunt of the decline again coming from a 52 percent MoM drop in FO. Oil sales declined two percent year-on-year in February 2019 dragged by 31 percent YoY decline in FO sales.

MoGas (MS) sales posted 10-month high growth of 16 percent YoY in expectation of rise in petrol prices, whereas Diesel (HSD) decline was restricted to one percent YoY versus average decline of 22 percent YoY in seven months of FY19.

Adjusted for the lower number of days during February MS and HSD volumes increased by 12 percent MoM and 20 percent MoM, respectively, with daily averages standing at 21,900 and 20,900 tons.

Research Analyst Hassan Ali Miabhoy of Optimus Capital Management said, “Lower furnace oil off take during the month can be attributed to higher demand in January, when lower gas and water availability forces IPPs to generate electricity on the more expensive black oil.”

In January, 360,000 tons of furnace oil was consumed, which has normalised back to 171,400 tons in February, he added.

“FO offtake is expected to remain low going forward, which is likely to take its toll on HSD consumption. However, an increase in trade activity in the country holds the potential to offset the FO-related losses,” the analyst said.

According to a report, HASCOL emerged as the star performer during the month, increasing its overall market share by 26 basis points, with a 50bps MoM increase registered in the company’s MS market share. The company sold a total of 196,600 tons (7,000 tons/day) of energy products during February, compared to 210,500 tons (6,800 tons/day) in the earlier month.

PSO once again lagged the industry, losing 2.6ppt of its market share during the month, largely driven by 11.8ppt MoM/54bps MoM attrition in FO and HSD market share, respectively.

Analyst Shankar Talreja of Topline Securities said, “Key Risks to OMCs included slower than expected decline in economy, higher inventory losses, and phase out of FO earlier than expectations.”

Attock Petroleum Limited’s overall volumes posted growth of three percent YoY to 143,000 tons during February 2019.

Product wise, the unlisted GO Petroleum remained the top performer in MS oil sales, and gained 2.3ppts YoY in its market share to eight percent. On the HSD front, Byco Petroleum outperformed and gained 1.7ppt YoY in its market share, up 7.5 percent.

Increase in HSD sales has been attributed to multiple factors by analysts, from stockpiling due to expected increase in prices in early March to higher demand in the agriculture sector, and hoarding by consumers in anticipation of escalating tensions between Pakistan and India.