Oil marketing sector expected to grow by 8%: KASB

KARACHI: Oil marketing company volumes will grow by eight per cent during the fiscal year of 2010 according to estimates by KASB Securities.

Petroleum sales increased by 34 per cent in March month over month and sales were up 11 per cent in the first nine months of the current fiscal year compared to the same period last year.

Furnace Oil sales were up by 13 per cent, gasoline sale was up 33 per cent and aviation fuel sales were up 44 per cent.

Furnace oil demand is expected to increase due to the government’s continued reliance on thermal power generation, according to KASB securities.

Oil marketing companies are set to show strong core earnings in the third quarter of the fiscal year 2010, according to analysts, as the industry showed robust volumes and grew by seven to 14 per cent this quarter of the current fiscal year compared to the same period last year.

PSO may benefit by Rs2.03b in the third quarter of the fiscal year 2010, according to KASB Securities, analyst, Mohammad Fawad Khan. He expects their earnings per share to increase by Rs11.86 in March 2010.

APL may benefit by Rs0.83b in the third quarter of the fiscal year 2010, according to Fawad Khan. He expects their earnings per share to increase by Rs14.4 in March 2010.

Strong volume rebound in March

Oil marketing industry growth may be at risk due to government plans to use rental power projects for bridging power shortages though. PSO’s growth and earnings per share is at risk due to further deterioration on receivables build-up in energy sector.

Furnace oil and gasoline leading the charge

Growth in furnace oil sales is constrained by delays in commissioning of new projects and ongoing inter-corporate debt, according to Fawad Khan. Analysts believe that the 33 per cent growth in gasoline sales march is due to smaller difference in price spread between CNG and gasoline and the use of gasoline in domestic generators to cope with power shortages.