LAHORE - With the highest sales of high speed diesel (HSD) since Oct 2009, total oil sales for the outgoing month of May 2012 have improved by 24 per cent on monthly basis, says the preliminary data provided by the industry. However with lagging support from other products like furnace oil and jet petrol, the consumption of oil products continued to show negative momentum for the sixth straight month, registering a down of 2 per cent YoY when compared to the same period last year, due to halt in supplies to NATO forces and rising circular debt which led the companies to avoid any sale deal with Pakistan.
According to preliminary numbers available with the industry, oil consumption for the country in May12 has improved by hefty 24 per cent compared to the previous month. Thanks to marked improvement in offtakes of HSD (up 48 per cent) and continuous improvement on MS (up 25 per cent), total sales of major products have clocked in at 1.8m tons compared to 1.44m tons in April 2012. The seasonal factor and additional demand from agriculture sector led the improvement in HSD while CNG shortages contributed to increased sales in MS. Moreover increase in demand for FO (up 8 per cent) can be linked to the recently released deferred payments on account of circular debt by the government.
Minimal improvement was also seen in JP sales (up 6 per cent) though it was far lower than pre-NATO blockade period. Despite MoM improvement, oil comparison still lagged behind when compared to the same period last year. Lower sales in FO (down 17 per cent YoY) and JP (down 37 per cent) caused the industry numbers to exhibit a negative trend. However better sales in HSD (up 16 per cent YoY) and MS (up 24 per cent) slowed the overall decline to 2 per cent YoY.
Despite double digit improvement in May 12 consumption numbers, oil sales in the emerging economy of Pakistan fell by 1 per cent YoY in 11MFY12. This slowdown is attributable to 1) rising circular debt which led the oil marketing companies to shy away from FO sales, 2) higher product prices and 3) halt in supplies to NATO forces. The consumption during the period clocked in at 17.8m tons compared to 17.9m tons in the corresponding period.
Furqan Punjani, an energy expert, observed that the highest percentage decline was seen in JP (down 32 per cent YoY) on account of close down of NATO supplies since Dec11, followed by FO (down 5 per cent).
Moreover, with continuous increase in prices for commercial fuel i.e. HSD prices, users preferred to opt for cheaper alternate fuels like CNG and MS. Subsequently, HSD sales during the period declined by 2 per cent and the switch over demand led the MS consumption to increase by healthy 21 per cent in 11MFY12.
Chances are that populist measures by the government in the next few months to curtail power outages through partial payments to IPP-OMC chains may ignite fresh interest in the sector.