CHI - Oil consumption witnessed a significant decline of 9.6 per cent Year on Year during Feb with total volumes standing at 27-month low at 1.30 million tons due to petroleum products high prices in the country.
On a monthly basis, the decline stood even worse at 26.6 per cent in Feb owing to decline recorded by almost all the petroleum products during the month.
Still, the total oil consumption growth during 8MFY10 remained in the double digits marking at 12.07 percent YoY with total volumes (excluding non-energy) at 13.07mn tons.
During 8MFY10 period, local refineries contributed 48 percent to the total POL consumption against contribution of 50 percent in same period last year.
Near to all-time low spreads on the POL products alongside liquidity crunch with altered pricing mechanism, knocked down local refinery sector earnings in the recent time.
Thus, in order to make up for losses, local refineries were compelled to operate below the optimal level capacity, which are currently operating at 60 percent. Consequently, country reliance on imported fuels remained high during 8MFY10.
Fortunately, the imports share has come down by 600bps in 8MFY10 (from 58 percent until 1HFY10) due to decline in HSD imports from 61 percent in Jan-10 to 54 percent of its total consumption in Feb-10 - mainly owing to rising prices and increased liquidity crunch faced by the OMCs (mainly PSO).
On the other hand, FO imports stayed robust as over 70 percent of the consumption was met through imports despite its rising prices (Furnace Oil and High Speed Diesel constitute over 90 percent of total POL product imports).
The petroleum consumption growth during 8MFY10 was mainly contributed by Black Oil, which include FO +17.9 percent, LDO -14.3 percent YoY with cumulative share of 63 percent in volume growth, and Mogas with 20 percent share in sector growth marking 17.5 percent and 31 percent YoY growth respectively.
The reason why mainly FO growth could shine was the ever-rising power generation on fuel oil based thermal power plants, which is expected to rise as further capacities on fuel oil come online in coming periods.
Major consumer petroleum products i.e. HSD and MS recorded historic lows. HSD in this regards, marked its all-time monthly low (as per 6 years data) at 420k tons in Feb-10 while MS volume recorded a 9-month low at 125k tons in Feb-10.
Khurram Schehzad, at Investcap research, said that as mentioned earlier, rising prices of the retail products on both MoM and YoY basis was the primary reason behind consumption decline in Feb-10 causing HSD and MS to plunge by 38 percent and 27.7 percent Month on Month (with corresponding consumption surge in alternates like CNG and LPG as the price differentials widened).