Production boost: Oil sales rise on strong demand from power producers, farmers

Sales of diesel surge 25% whereas furnace oil demand increases 17%

OUR CORRESPONDENT: Oil sales rose 16% on a month-on-month basis to 2.22 million tons in April on the back of increased demand for furnace oil from power producers and diesel for running tractors during the current wheat sowing season, according to a brokerage house on Wednesday.

Sales of high-speed diesel (HSD) surged 25% to 798,000 tons while furnace oil demand rose 17% to 757,000 tons in the month. Sales of petrol increased 6% to 573,000 tons, Taurus Securities said quoting data compiled by the Oil Companies Advisory Council.



April marks the beginning of Kharif sowing season with wheat being a major crop, which drives the demand for HSD consumption by tractors that make up more than 70% of the overall diesel-driven vehicles in Pakistan.

Furthermore, the arrival of summer warranted a surge in power consumption, which had to be met through furnace oil-based power plants as per the country’s current generation mix. Furnace oil had contributed 33% to the generation mix in March 2017.



“Lastly, we believe hot weather kept motorists at bay from long routes, keeping motor spirit (MS) volumes relatively flat at 573,000 tons,” the brokerage house said.

Market share

An impressive growth was recorded in sales volumes of Attock Petroleum Limited (APL) and Hascol that rose 57% and 54% on a year-on-year basis to 198,000 tons and 219,000 tons respectively.

“With most of its stations running in Punjab, APL remained the prime beneficiary of the crop sowing season as reflected in the 40% month-on-month rise in HSD sales, taking its overall monthly share to 8.9%, a six-percentage-point jump from last month,” it said.



PSO’s market share stood at 52.8% whereas Shell Pakistan and Hascol had shares of 9.5% and 9.9% respectively, it added.

While companies realise the importance of China-Pakistan Economic Corridor and the need to expand, news keep flowing in about their plans. Hascol announced, in its annual report, that the company was seeking a stake in one of the liquefied natural gas (LNG) terminals while PSO vowed to modernise Pakistan Refinery after acquiring a majority stake.

Players are rapidly building storage facilities in line with directives of the Oil and Gas Regulatory Authority (Ogra).

Outlook

According to Taurus Securities, the outlook continued to be favourable for the oil marketing companies based on rapid construction activities in the country, higher automobile demand and rebranding and improvement in Pakistan Railways.



“We believe MS sales will slightly increase as holiday season approaches towards May-end while the Kharif season will keep HSD volumes elevated. Lastly, the government is expected to stretch its arms to provide maximum relief in terms of electricity provision ahead of elections, which we think would further augment furnace oil sales,” the brokerage house said.

The government has apparently abandon the fortnightly price formula after stability in oil prices while keeping rates unchanged for the ongoing month (MS at Rs74 per litre and HSD at Rs83 per litre).