Oil sale down 18pc as PSO cut supply to power sector

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LAHORE – The oil sales posted a hefty 18 per cent monthly fall in Feb 2013 to 1.4 million tons mainly due to reduction in furnace oil supply to power sector by the PSO. Experts said that the massive decline mainly emanated from a gigantic 30 per cent MoM drop in FO demand, which was further dragged by 12 per cent and 6 per cent fall in Motor Spirit (MS) and High Speed Diesel (HSD), respectively.

As per oil marketing companies, drop in Furnace Oil (FO) was mainly led by deliberate supply cuts to power sector by major provider i.e. PSO, due to circular debt issue. On the other hand, as far as growth decline in MS is concerned, a high base-effect was in place during Feb-13 consumption numbers as Jan 2913 saw massive growth in petrol sales amid gas (CNG) shortage going through roof.

The experts from AHL, observed in a report that annual comparison for Feb mirrors quite an opposite picture, where the sector posted rather 3 per cent YoY growth in oil consumption. This was mainly on account of strong demand pull-back in MS and HSD by 27 per cent YoY and 3 per cent YoY, respectively, as extreme scarcity of CNG revitalized the demand of conventional fuels. FO, on the other hand despite lower hydel generation, posted a YoY drop of 9 per cent in Feb-13 to 0.5 million tons, as the OMCs remained reluctant to increase their exposure to the circular debt-plagued FO market.

For the cumulative 8MFY13, oil consumption remained flat around 12.6 million tons as the massive 18 per cent YoY growth achieved in MS volumes was largely diluted by a 3 per cent and 1 per cent fall in HSD and FO volumes, respectively. The impact of mild percentage drop in these segments has a wider impact on the total sales as later both contribute around 78 per cent of the total oil consumption.

A steep 35 per cent fall in FO volumes led PSO’s market share to drop by 5 percentage points to 59 per cent in Feb-13 compared to 64 per cent in Jan-13 as FO constitutes around 50 per cent of the total volumetric sales of PSO. However on a cumulative 8MFY13 basis, the Oil Giant holds its leadership position at 64 per cent market share.

Lower gas availability for transportation sector coupled with ban on the installation of CNG kits in new vehicles has led to strong substitution effect for Petrol, evident from a massive 14 per cent YoY jump in MS sales to 2.1 million tons. Experts believe this demand momentum will gather pace going forward, as continued substitution effect is expected to take MS demand up 18 per cent YoY in FY13 to 3.2 million tons.

Increased use of CNG in public transportation across the country has been taking its toll on the HSD demand leading to a 3 per cent YoY drop in 8MFY13.

Despite higher FO demand with lower gas availability, FO consumption remains subdued as OMCs are reluctant to supply FO on credit to the power sector due to continued liquidity constraints. Experts expect oil consumption to post a modest 2.5 per cent YoY growth in FY13 to 19.3 million tons compared to 18.8 million tons in FY12. MS is expected to lead the way with an 18 per cent YoY growth, while HSD is expected to remain the major drag with an anticipated 3 per cent YoY fall in volumes.

 

Courtesy: The Nation


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