OMCs on recovery road: Volumes surge in May’20 as restrictions eased

June 03, 2020 (MLN): Oil Marketing Companies (OMCs) witnessed 39% increase in volumetric sales of petroleum products, reached to 1.48 million tons in May’20 over April’20 as the easing of lockdown restrictions kicked in along with a substantial reduction in POL price, bringing industry volumes for 11MFY20 to 14.5 million tons.

On a yearly basis, the total industry sales declined moderately by 12% YoY when compared to 1.67 million tons in May'19.

During May’20, the substantial improvement in volumetric sales across all categories on month-on-month basis showed signs of demand revival due to resumption of economic activities as demand for Motor Spirit (MS) increased by 46%, followed by HSD which is a key fuel for transportation and freight witnessed an increase of 26% on the back of harvesting season demand and cumulative price reduction of Rs 47.1 per litre since Feb’20.

On the other hand, IGI securities research underlined that the volume of Furnace Oil soared by 109% MoM due to slightly higher generation by FO based plants,

Meanwhile, the YoY deterioration in Fuel demand was witnessed across all categories except MS, wherein HSD volumes dropped by 3%. This decline in HSD sales is likely attributable to grey market sales. A massive decline of 51% in FO volumes shows bleak power demand despite lower prices.

Among four major players of OMCs, PSO led the chart by posting a massive growth of 60% MoM to 622 thousand tons on an account of increased volumes of HSD and MS by 55% and 72%, MoM.

However, May’20 turned out to be a nightmare for PSO with volumes declining by 27%YoY against 12%YoY of the industry majorly due to a decline in FO volumes of 93%YoY, as per research note by AKD securities. In addition to this, the company also lost its market share by 9ppts from 51% in April’20 to 51% in May’20.

On the other hand, HASCOL managed well amongst its peers as its market share increased to 8% in May’20 against 7% of April’20, posting a growth of 43% MoM and 48% YoY in retail fuels against an increase of 35% MoM and 1%YoY for industry, AKD research highlighted.

APL had a mixed bag, depicting a growth of volumetric sales of 45% on a sequential basis owing to easing restrictions whereas its market share for May’20 remained at 9%.

Furthermore, like PSO, the market share of SHELL dropped to 7% in May’20, while the share of BYCO increased to 8% in May’20 against 4% in April’20.

Going forward, the demand for petroleum products is likely to rise even more in the coming months with further ease in lockdown. Declining prices and harvesting season demand will further uplift the volumes.

According to the research by IGI securities, MS sales are likely to remain buoyant, however, virus impact may likely impact new car sales which can restrict further growth.

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