Oil demand rises strongly

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KARACHI – After witnessing a slump in oil consumption on account of devastating floods in the 1HFY11, the local oil demand pattern continues to show growth. During March 2011, the country’s oil consumption rose by a significant 21 percent monthly and two percent YoY to stand at 1.7 million tonnes, on account of higher sales of Furnace Oil (FO) and Motor-spirit (Petrol).
Worryingly, a spike in consumption has increased country’s reliance on imported resources to 75 percent compared to 68 percent the previous month. Overall, oil consumption declined by 2.9 percent to stand at 14.3 million tonnes in March compared to 14.8 million tonnes in the same period last year.
During March 2011, sales of furnace oil (FO) depicted a massive surge of 26 percent monthly and 20 percent annually to stand at 836,000 tonnes on the back of robust demand from the power sector. Petrol sales have also depicted an up-tick of 16 percent and three percent on account of gas load management, in monthly and annual terms, respectively.
High Speed Diesel (HSD) with a weightage of approximately 33 percent in oil consumption rose 18 percent in monthly terms but showed a decline of 14 percent compared to the same time last year. During the month under review, the impact of floods continues to reflect on the consumption level depicting a decline of 2.9 percent to stand at 14.4 million tonnes on account of reduced sales of FO and HSD which fell by 1.7 percent and 7.8 percent.
On the contrary, petrol has surged by 18.1 percent, a reflection of gas curtailment to transportation sector. Amongst domestic companies, Pakistan State Oil (PSO) sales depicted an up-tick in March 2011 by a significant monthly factor of 29.7 percent. This was seen on account of sharp rise in demand for FO and HSD due to the increased power generation requirement. However, during 9MFY11, PSO’s sales were 11 percent lower than the same period last year and impacted adversely on the company’s market share.
The lost ground of PSO was gained by other listed companies such as Shell Pakistan and Attock Petroleum, whose sales went up by 17 percent and 14 percent in 9MFY11 to stand at 2.1 million tonnes and 935,000 tonnes, respectively. The market share of Shell rose by two percentage points to 14 percent during the month under review while APL has maintained its market share at six percent.
Looking ahead, the upsurge in volumetric sales is expected to bode well for the OMCs’ profitability but increased reliance of FO for power generation would further strain the cash position of OMCs, particularly PSO that have a market share of 78 percent in FO market, said Nauman Khan at Topline.