Expecting fuel consumption to mark a modest 2.5 percent growth in fiscal year 2012-13, the market analysts Friday observed the oil sales, excluding non-energy, posting a hefty 18 percent MoM fall in Feb-13 to 1.4 million tons.
This massive decline mainly emanated from a gigantic 30 percent MoM drop in FO demand, 39 percent contribution, which was further dragged by 12 percent and 6 percent fall in Motor Spirit (MS) and High Speed Diesel (HSD), respectively. “As per our discussion with the companies’ management, drop in Furnace Oil (FO) was mainly led by deliberate supply cuts to power sector by major provider i.e. PSO, due to circular debt issue,” said the analyst at Arif Habib Research in a report issued Friday. On the other hand, they said, as far as growth decline in MS was concerned, a high base-effect was in place during Feb-13 consumption numbers as Jan-13 saw massive growth in petrol sales amid gas (CNG) shortage going through roof.
A YoY comparison for Feb-13 mirrors quite an opposite picture, where the sector posted rather 3 percent YoY growth in oil consumption. This was mainly on account of strong demand pull-back in MS and HSD by 27 percent YoY and three percent YoY, respectively, as extreme scarcity of CNG revitalized the demand of conventional fuels. FO, on the other hand despite lower hydel generation, posted a YoY drop of 9 percent in Feb-13 to 0.5 million tons, as the OMCs remained reluctant to increase their exposure to the circular debt-plagued FO market.
For the cumulative 8MFY13, oil consumption remained flat around 12.6 million tons as the massive 18 percent YoY growth achieved in MS volumes was largely diluted by a 3 percent and 1 percent fall in HSD and FO volumes, respectively. The impact of mild percentage drop in these segments has a wider impact on the total sales as later both contribute around 78 percent of the total oil consumption. A steep 35 percent fall in FO volumes led PSO’s market share to drop by 5 percentage points to 59 percent in Feb-13 compared to 64 percent in Jan-13 as FO constitutes around 50 percent of the total volumetric sales of PSO.
However on a cumulative 8MFY13 basis, the Oil Giant holds its leadership position at 64 percent market share. Lower gas availability for transportation sector coupled with ban on the installation of CNG kits in new vehicles has led to strong substitution effect for petrol, evident from a massive 14 percent YoY jump in MS sales to 2.1 million tons. “We believe this demand momentum to gather pace going forward, as continued substitution effect is expected to take MS demand up 18 percent YoY in FY13 to 3.2 million tons,” said the analysts.
They said that increased use of CNG in public transportation across the country had been taking its toll on the HSD demand leading to a 3 percent YoY drop in 8MFY13.
