Boosted by a strong growth in the sale of Furnace Oil (FO) and Motor Gasoline (MOGAS), the sale of Petroleum Oil and Lubricant (POL) in the country rose by 22 percent to a 10-year high of 2.10 million tons in July 2016. This growth in POL sales, excluding non-energy products, shows 6 percent YoY growth.
"The YoY growth escalation in POL sales can be attributable to lower retail product prices and higher FO demand, which moved in tandem with international oil prices," said analysts at AHL Research in a report issued Thursday. Umair Naseer of Topline Securities said FO sales during the review month surged by 28 percent YoY to 0.95 million tons driven by higher demand from power sector. "Power generation in the country is on the rise as FO prices are down 29 percent YoY," the analyst said.
Citing numbers issued by National Electric Power Regulatory Authority (NEPRA), he said power generation was up 8 percent in Jun2016. MOGAS also remained strong as its sales were up 31 percent to 0.55 million tons. "Strong growth in MOGAS can be attributed to lower petrol prices and increasing car sales," said Naseer.
High Speed Diesel (HSD), the second major retail product, witnessed six percent growth to stand at 0.54 million. AHL analysts Shahbaz Ashraf and Waleed Rahmani said lower HSD sales dragged the total sales down on month-on-month basis. The sequential monthly decline, they said, was primarily led by HSD amid lower infrastructural activity in Jul16 given week-long Eid holidays.
To recall, they said, the total POL sales in FY16 increased to 23.26 million tons compared to 22.16 million tons in FY15, mainly on account of lower product prices coupled with increased demand for major products. Similarly, the retail price of HSD decreased to Rs 72.52/liter in Jul'16 from Rs 87.11/liter in the same period last year. Resultantly, HSD volumes also increased to 0.55 million tons in Jul'16 from 0.52 million tons.
"Albeit, on a YoY basis, volumetric growth in HSD was owed to augmented infrastructural activity as work on CPEC projects picked up pace," they said. Akin to other products, FO has also witnessed a stellar growth of 32 percent YoY in Jul'16, with volume expanding to 0.93 million tons (Jul'15: 0.71 million tons).
"The improved demand for FO, amid lower prices, was also reflected in the country's electricity generation; case in point: FO's contribution increased to 32 percent in Jun'16 in contrast to 25 percent this time last year," said they. To recap, the average price of FO dipped to Rs 38,044 from Rs 47,821 per ton in Jul'15.
Detailing company-wise production, Naseer said Hascol Petroleum (HASCOL) continued to post strong growth as the company's sales grew by 55 percent to 151000 tons in Jul2016. Market share of the company increased to seven percent versus 5.5 percent in the same period last year.
Pakistan State Oil (PSO) maintained its market share of 57 percent as total sales grew by 22 percent to 1.2 million tons. Sales of Shell Pakistan (SHEL) and Attock Petroleum (APL) remained flat during the month under review to clock in at 191000 tons and 162000 tons, respectively. "Going forward, we expect the petroleum prices to increase which can negatively impact the OMC volumes. However, the recent increase in OMC margins, will corroborate bottom-lines of these companies," the AHL analysts said.