OMCs: PSO faces the most heat of lockdown, both sales and market share decline

April 2, 2020 (MLN): Oil and Marketing Companies (OMCs) in Pakistan which were already experiencing month after month lows in their sales volume are now ready to face the heat on the back of lockdown due to COVID-19 pandemic which halted the operations of the industrial and transportation sector.

Due to this pandemic, the total industry sales volume during the month of March 2020 nosedived significantly by 31% YoY and 9% MoM to 1.0 mn tons, bringing the cumulative sales to drop by 11% YoY in 9MFY20 to 12.2 mn tons, compared to 13.66 mn tons in the same period of last year.

The YoY deterioration in Fuel demand was witnessed across all categories with the major dragged came from 66% YoY drop in the demand of Furnace Oil (FO) and 34% YoY decline in High-Speed Diesel (HSD) as a result of a slowdown in economic activity amid COVID-19 concerns. Whereas, the sale of Motor Gas (MO) dropped by 17% YoY.

On a monthly basis, the demand for HSD witnessed a slight increase of 2%, whereas, FO sales saw a significant decline of 56%. While the MOGAS, having a share of 53% in total industry’s sale for March, witnessed a marginal decline in its demand during the said month.

Company-wise, PSO felt the most brunt of this lockdown as their total sales plunged significantly by 39% YoY and 6% MoM to 382 thousand tons. The company witnessed a decline in demand across all categories of fuel. In addition to this, the company also lost its market share by 5ppts from 43% in February 2020 to 38% in March 2020.

On the other hand, HASCOL and SHELL witnessed an increase in sales volume on a sequential basis by 9% and 2% MoM, whereas, on yearly basis, both the market players saw a considerable decline in sales volume by 31% YoY and 27% YoY to 85K tons and 95K tons respectively.

Meanwhile, on a monthly basis, APL witnessed the largest decline in sales volume by 20% to 112k tons. On a yearly basis, APL’s sales volume shrank by 29% YoY. Likewise, PSO, APL also observed a decline in sales across all categories both on a yearly and monthly basis.

Furthermore, unlike PSO, the market share of HASCOL, SHELL and APL improved during the month.

Projecting the future position of OMCs, Darson Securities in its research note highlighted that the sales volume of OMCs is expected to remain under pressure amid lockdown as demand for petroleum products decline, moreover, FO based power plants which are now up on merit list due to decline in FO prices expected to lift up FO sales in the near term.

Another research house BIPL securities in its research note said that amid oil price crash and a slowdown in demand across the country, OMCs are expected to encounter hefty inventory losses in 3QFY20.

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