• Provisional OMC data show a 29%yoy drop in petroleum products for Jun’19. FY19 sales then settled at 18.6mn tons, down 24% yoy. In FY19, continuous shift in power fuel from expensive Furnace Oil (FO) to other fuels (coal, LNG), led to major volume contraction in FO sales. HSD demand also remained weak due to economic slowdown and unchecked smuggling.

• During Jun’19, HSD sales slumped by 24%yoy due to above reasons. In addition, Mogas volumes also declined by 8%yoy in Jun’19, the sharpest drop for any month during FY19. Prices of retail fuels have been on an upswing (MS/HSD prices up 18%/14% during CY19TD), where PKR depreciation has been offsetting lower oil prices in international markets.

• APL stood out in terms of market share performance during Jun’19, adding 2.8ppt from last month to take its share to 11.3%. APL has been adding storages and retail outlets to maintain its market share in early teens. This came in again at the expense of HASCOL as its share dropped to a 4yr low. New competition is also eating HASCOL’s share as the company wants to focus on higher margin customers only. PSO and SHELL witnessed smaller changes and appear to be consolidating at their recent averages (market share of 45.0% and 8.5%, respectively). Recent improvement in PSO’s share is also due to seasonally higher FO demand.

• Within OMC space, PSO can benefit from power sector reforms under the IMF program as circular debt issue is being addressed. For example, there has already been a power tariff hike of PKR1.49/unit from Jul’19 while additional Power Sukuks are expected. The recent recovery in market share is also encouraging. Also, petroleum sourced from Saudi Arabia with deferred payment arrangement will come entirely through PSO, thereby likely to improve its market share further in FY20. (Courtesy – Intermarket Securities Limited.)