HSD sales increased 23% YoY to c.624,000 MT in July, with the growth driven by a low base effect. Last year’s figure was depressed by the monsoon floods, versus a tamer ongoing monsoon season this year. Sequential growth was also impressive, rising 20% MoM despite higher prices, pointing to potentially reduced smuggling.

MS sales came in at c.729,000 MT, up 19% YoY, where the improvement is likely driven by a pickup in economic activity in combination with lower smuggling, which helped offset some of the impact of higher prices at the pump. PSO’s performance remained the most notable in this fuel segment, up 44% YoY, outperforming the industry as it gained back market share at the expense of GO.

Furnace Oil sales surged 406% YoY to c.78,000 MT, driven by higher use in the power sector following supply chain disruptions in the Middle East causing shortages of RLNG.

PSO started FY27 on a strong note, recording the largest market share gain among major OMCs, rising 4.9ppt to 46.5% at the expense of GO, which saw a 6.6ppt decline in market share to 5.7%, as geopolitical tensions in the Middle East disrupted fuel supplies from the OMC’s major fuel supplier, Aramco.

OMC sales posted a robust recovery in July despite continued high fuel prices, as recovering economic activity along with reduced smuggling from the Iran border helped support volumes. With the US and Iran expected to continue negotiations after the hostile military operation in July, we expect lower prices to help support volumetric growth, although any resumption of smuggling remains a risk.

With the government making the OMC margin hike conditional on digitalization of the oil supply chain, we expect enforcement measures to continue tightening going forward, which should close the operating environment for illegal fuel operators. PSO remains our top pick in the sector as the largest player, having seen significant market share gains during the month, with a target price of PKR570/sh.