The downward streak in petroleum consumption continues as January 2023 sales by the oil marketing companies fall by 20 percent year-on-year. The decline in petroleum sales for the OMCs was led by a decline in furnace oil sales followed by high-speed diesel and motor spirit. Furnace oil posted a decline of 45 percent for volumes sold in Jan-23 year-on-year, while diesel volumes were down by 21 percent year-on-year. Motor spirit consumption was weaker by 13 percent year-on-year.

Key factors for weaker sales by the OMCs in January included the ongoing economic dishevel and rising petroleum prices. The economic activity is at its nadir with falling auto sales, large-scale manufacturing, and agricultural activity. At the same time, higher inflationary pressures and rising petroleum prices have been curbing demand as well. These together have created a major dent in the volumetric sales of the oil marketing segment.

The month-on-month sales however were slightly better, registering a growth of around eight percent. The primary factors behind the rise in oil volumes in January over December were the re-opening of schools and some decline in petrol prices that lifted diesel and petrol sales.

The OMC data by the OCAC shows this trend of falling sales of petroleum products by the oil marketing companies in 7MFY23 stats too. Overall, the OMC sales witnessed a fall of around 19 percent year-on-year during the seven months ended Jan-23. Product-wise, the furnace oil, diesel, and petrol were down in double digits by 27 percent, 23 percent, and 15 percent year-on-year, respectively. The decline in all aspects indicates the current situation of the economy. The slump in oil consumption has been triggered by weak economic activity and outlook. The decline in economic activity has led to weak LSM, a contraction in car sales, and weaker agricultural productivity. Moreover, the floods in 2022 restricted transport and agriculture, and irrigation activity, which also added pressure to petroleum consumption in the country. And then the high inflationary wave going on in the country has been restricting the growth in offtake. Plus, the winter season and higher prices have also been restricting the consumption of furnace oil in the power sector.

FY23 is definitely going to demonstrate a weaker offtake of petroleum products. The recent surge in prices, as well as more increase anticipated, continued political uncertainty, the economic mess in the country, and the overall decline in aggregate demand, will not bode well for petroleum consumption in the country.