OMCs: PSO posts muted performance despite strong rebound in HSD demand

May 05, 2020 (MLN): The overall volumetric sales of Oil and Marketing Companies (OMCs) in Pakistan inched up by 5% MoM in April 2020 to stand at 1.06 MTs against 1.02 MTs in March 2020 as the demand for fuel improved amid easing of restrictions for key industries, providing an impetus to the economy.

On yearly basis, the total industry sales declined substantially by 36% YoY when compared to 1.65 MTs in April 2019, bringing the cumulative sales to fall by 13% YoY in 10MFY20 to 13.26 MTs.

In April 2020, fuel demand turned out to be a mixed bag for OMCs as strong rebound was witnessed in demand for HSD, up by 42% MoM, followed by Furnace Oil (FO) increasing by 9% MoM owing to lower FO prices and seasonal increase in power demand. While demand for Motor Spirit (MS) hit 4-year low volumes of 436 KTs, down by 20% MoM as individual movement restriction continues.

Meanwhile, the YoY deterioration in Fuel demand was witnessed across all categories, wherein HSD volumes dropped by 16% due to slowdown in economic activities. A massive decline of 75% in FO volumes shows bleak power demand FO based power generation is being replaced with Coal and LNG.  

Among four major players of OMCs, PSO’s volumes witnessed a meagre increase of 1% MoM to 389 TTs on an account of increased volumes of HSD by 50% MoM. However, 47% decline was observed for YoY in company’s volume, contributed by YoY decline in FO and MS by 96% and 46% respectively. In addition to this, the company also lost its market share by 2ppts from 38% in March 2020 to 36% in April 2020.

On the other hand, HASCOL, APL and SHELL witnessed a decrease in sales volume on a sequential basis by 4%, 16% and 11% MoM respectively. It is worth highlighting that HASCOL came as a winner in retail fuel in April 2020 as it posted growth of 3% MoM in MS volumes despite the decline of 20% MoM in industry volume, revealed a research report by AKD.

Similarly, on yearly basis, all three market players saw a considerable decline in sales volume by 33%, 44% and 42% YoY to 82K tons, 95K tons and 81K tons respectively.

Furthermore, unlike PSO, the market share of SHELL and APL declined to 8% and 9% respectively in April 2020, meanwhile, share of HASCOL remained flat to 8%.

Going forward, AKD in its research note highlighted that the Fluctuating international crude prices and ongoing lockdown is going to drive volumes where any easing would further prop up HSD demand, however, extension in lockdown will hamper MS offtake.

Another research by IGI securities said that sales volume of OMCs is expected to recover amid gradual ease in lockdown as HSD sales are likely to remain elevated due to commencement of harvesting season of Rabi crop.

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