After a strong October, November 2024 also proved favorable for the oil marketing companies, as the sector’s volumetric sales reached a 25-month high of 1.58 million tons, reflecting a 15 percent year-on-year growth. This surge in petroleum consumption was primarily driven by heightened demand for motor spirit (MS) and high-speed diesel (HSD), supported by reduced smuggling activities and price adjustments.
In November 2024, MS consumption increased by 17 percent year-on-year, while HSD volumes expanded by 21 percent year-on-year. The rising demand for HSD was linked to peak harvesting activities and effective measures to curb smuggling from neighboring regions. Additionally, a 12–15 percent year-on-year decline in MS and HSD prices bolstered consumption. Over the first five months of FY25 (5MFY25), MS and HSD sales grew by 6 percent and 9 percent year-on-year, respectively.
In stark contrast, furnace oil (FO) sales experienced a sharp contraction. November 2024 recorded a 55 percent year-on-year decrease in FO volumes, largely due to reduced demand for FO-based power generation. Over 5MFY25, FO consumption plummeted by 37 percent year-on-year, underscoring a structural decline in the segment as the energy sector transitions to alternative fuels.
The growth in MS and HSD sales reflects some recovery in economic activities, particularly in transportation and agriculture. The industry’s performance has been significantly influenced by price adjustments and governmental efforts to curb smuggling. With economic conditions stabilizing and structural changes continuing, further growth in MS and HSD sales is anticipated. However, FO demand is expected to remain under pressure. Broader economic policies and global oil price fluctuations will play pivotal roles in shaping the sector’s future trajectory.
In a recent development, the Oil Companies Advisory Council (OCAC) proposed increasing OMC margins by PKR 4.78 per liter. This follows the Oil and Gas Regulatory Authority’s (OGRA) recommendation in October 2024 to raise margins on MS and HSD by just over PKR 1 per liter, a revision deemed insufficient by OCAC to offset rising costs. The proposed margin hike aims to address the financial sustainability of OMCs amidst escalating operational expenses and economic challenges. Key cost pressures necessitating the increase include rising finance costs, turnover taxes, handling losses, demurrage costs, and the financing of unadjusted sales tax, among others.
This proposed margin adjustment, coupled with a recovery in demand for MS and HSD, is expected to strengthen the financial position of oil marketing companies, enabling them to better navigate operational and market challenges. However, ongoing economic reforms and external market conditions will remain crucial determinants of sectoral stability and growth.