As per provisional data, overall OMC sales in June 2021 rose 14% mom to c.1.9mn tons (up 20% yoy). Doubling of furnace oil (FO) sales mom led the sequential growth in petroleum consumption; this was led by a rise in demand from the Power sector (PSO had 63% share) amid shortage of RLNG. Meanwhile, demand for retail fuels (HSD and Mogas) were flattish (up 2-6% mom), even though lockdown conditions in the North were relaxed by mid-May 2021 (by mid-June in Sindh).
Market shares in June diverged from the trends seen earlier in the year. PSO had an overall share of 47.5% (highest since Aug 2020) but this was majorly due to the quadrupling of FO sales mom; however, sales of both retail fuels underperformed the industry (share fell by 1-3ppt mom).
SHEL did well in the retail fuels (up 10-15% mom), gaining 1ppt share in HSD, while lockdown conditions were relaxed and SHEL opened new retail outlets. APL’s share improved by 0.5ppt in retail fuels, but it had a poor year (explained below). Notably, both Total-Parco (a multinational and urban centric) and GO (Vitol has 10% stake) continued to outperform SHEL and APL in the retail fuels.
FY21 sales performance: FY21 was a good year for OMC sales, with c.20% growth in overall consumption after three consecutive years of decline. Sales of HSD rose 17% yoy, amid overall economic rebound. Mogas sales were up 13% yoy propelled by sticky demand from its largest customer – motorcycles. FO sales jumped 56% yoy due to disruptions in RLNG supply for power; however, we do not expect this trend to continue in the future. Lastly, sales of Hi-Octane fuel (HOBC, 97 RON) tripled yoy, thanks to sharp price decline upon government intervention; Jet fuel sales fell c.30% yoy.
Market shares in FY21:
PSO was a clear winner, gaining 2ppt share to c.46.2%, not only because of the rebound in FO demand but also weakened competition (aided by the government crackdown on smuggling and other malpractices). On the other hand, APL lost 1ppt share to c.9.4% despite significant investment in storages; we understand this was partly because of a lost contract for supplies to the Army (APL has regained the contract for FY22). SHEL’s share was flat at c.8.0%.
Outlook:
A key deterrent for demand in FY22 could be higher retail prices. Note that the government has kept a high target for the collection of petroleum levy, which is presently not even 10% of its max level of PKR30/liter.
Courtesy – Intermarket Securities Limited