KARACHI: Oil sales dropped 11.4% to 1.87 million tons in December 2017 after the government closed a number of furnace oil-fired power plants as cheaper LNG and coal-based plants replaced the conventional method of electricity production.
“In December 2017, furnace oil sales declined by a hefty 44% year-on-year to 0.43 million tons after the shutdown of power plants,” Taurus Securities said on Wednesday.
However, “demand for MS (petrol)/HSD (diesel) remained strong and rose by 12% and 9% year-on-year, respectively,” it said. The increase in demand for petrol and diesel was driven by surging population of cars and two-wheelers in the country. During the first half of the current fiscal year, demand for retail fuels went up by 12% on a yearly basis to 8.40 million tons due to growing automobile sales, and high infrastructure development activities.
“As anticipated, furnace oil sales remained on a downward trajectory (down 13% year-on-year) as circular debt piled up to Rs441 billion, along with growing current account deficit, propelling the government to reduce reliance on expensive furnace oil-based power plants,” the brokerage house said.
On a company-wise basis, during the first half of the fiscal year, Hascol Petroleum continued to gain market share to 10.8%, up by 314 basis points. Similarly, Attock Petroleum Limited’s total market share inched up to 8% (up 33 basis points). Despite its strong retail network, Pakistan State Oil (PSO) was not able to sustain its market share (down 129bps to 55.5%), due to decline in furnace oil sales. “In the upcoming months, we expect furnace oil (and high speed diesel sales volumes to slightly improve as hydel generation dips in winter and due to the on-going sugar crushing season.
“With OPEC and non-OPEC members expected to honour the production freeze agreement, and escalating tension in Iran - OPEC’s third largest oil producer - we expect a soft increase in prices of crude oil, likely resulting in inventory gains,” it said.
Published in The Express Tribune, January 4th, 2018.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.