FY24 was a tumultuous year for Pakistan’s Oil Marketing Companies (OMCs), marked by significant declines in overall sales volumes despite sporadic periods of recovery. The total sales for FY24 fell to 15.28 million tons, an 8 percent year-on-year decrease from the previous fiscal year’s 16.61 million tons.
This represents the lowest sales volume in nearly two decades, highlighting the sector’s struggle amid economic and operational challenges.
Despite the overall annual decline, June 2024 showed a notable recovery with sales reaching the highest point in 19 months. This 8 percent year-on-year and 4 percent month-on-month increase was driven primarily by a reduction in fuel prices and higher seasonal demand. However, this recovery was insufficient to offset the significant annual decline. Motor Spirit sales rose by over 15 percent month-on-month and 9 percent year-on-year in June 2024. The increase was due to a significant reduction in petrol prices and seasonal factors like summer vacations in schools and colleges. High Speed Diesel sales on the other hand sales fell by around 11 percent month-on-month but increased by 5 percent year-on-year.
The decline from May was, however, expected due to the end of the harvesting season, indicating the seasonal nature of diesel demand. Furnace oil sales surged significantly by 54 percent month-on-month and by around 6 percent year-on-year in June, driven by higher power generation requirements during the summer.
The annual performance of the OMC sector in FY24 in terms of volumetric sales was affected by several factors. First, the slower-than-expected economic recovery post-COVID-19 and macroeconomic challenges significantly impacted fuel demand. High inflation and reduced industrial activity contributed to lower consumption of petroleum products. Second, elevated international crude prices, coupled with local currency depreciation, led to higher fuel prices domestically. This discouraged consumption and pushed consumers towards alternative and illegal sources of fuel. Third, the influx of smuggled fuel into the country created unfair competition for OMCs, further reducing official sales volumes.
Company-wise performance shows that where all key OMCs witnessed a decline in market share in June 2024, companies that adapted quickly to changing market conditions, such as SHEL, showed better resilience.
OMCs face the dual challenge of navigating an uncertain economic environment and addressing structural issues within the sector. A modest recovery is anticipated in FY25, driven by economic stabilization and strategic adjustments. FY24 was a challenging year for Pakistan’s OMC sector, marked by significant declines in sales volumes due to economic pressures, high fuel prices, and competition from smuggled fuel. The significant impact of smuggled fuel on sales volumes underscores the need for stronger regulatory measures and enforcement to protect legitimate market players.