As per provisional data, overall OMC sales in October 2020 grew 6% yoy and 11% mom to 1.7mn tons following a dull September. Excluding furnace oil (FO), however, petroleum sales were flat yoy but up 22% mom, as FO sales fell 22% mom due to lower RFO based power generation. HSD sales, while nearly flat yoy, accelerated by 43% mom on the back of sharp rise in economic activity (robust sales in the construction and export industries). Mogas (petrol, 92 RON) sales were up 6%/7% yoy/mom, propelled by lower prices and rising motorcycle sales.
Among other fuels, sales of jet petroleum (for airplanes) rose 64% mom (albeit still 41% lower yoy) amid resumption of domestic and international flights. PSO has over 90% share of this market (deregulated). On the other hand, sales of high-octane gasoline (HOBC, 97 RON), which is also deregulated, has continued to grow strongly since the government has enforced normalization of prices at the pumps. They rose 41% mom and are 3x the volumes of October 2019.
In October, there were very little changes in market shares on an overall basis; the four OMCs we track (PSO, APL, SHEL, HASCOL) sold 68% of the total petroleum volumes, same as in last month. PSO’s overall market share remained at c.45%, as it grew in tandem with the overall industry. APL lost 1ppt to 10% share, where growing sales of furnace oil (22% of total) could not make up for losses in the retail fuels. Notably, there was no clear winner in the HSD market, which we consider to be the key driver of sales growth in the near term; all major OMCs maintained their shares.
During 4MFY21, overall petroleum consumption rose 9% yoy (4% without FO), where a 6% yoy growth in HSD sales point to rising industrial activity and 7% yoy growth in Mogas shows rising consumer confidence after the lockdown, in our view. FO sales rose 33% yoy because low prices have improved the economics for FO based captive power.
The pickup in sales raises optimism about future demand, in our view. The industry awaits the revision of OMC margins for the retail fuels (which are overdue since July 2020), as well as progress on a new Petroleum policy for the downstream sectors, which can lead to more constructive competition and reduced earnings volatility, all else the same, in our view.
(Intermarket Securities Limited)