Petroleum products sales rise in Pakistan during May 20

As per provisional data, overall OMC sales in June 2020 grew a remarkable 19% yoy and 9% mom to 1.6mn tons. Excluding furnace oil (FO), the jump in sales was an even more impressive 39% yoy. Sales of Mogas (petrol) rose 28% yoy (up 14% mom) to 726,000 tons, which is majorly attributed to the lifting of lockdown and significantly lower prices (c.PKR75/liter). HSD (diesel) rose more emphatically to 753,000 tons, by 68% yoy (10% mom), which is a good indication of the rebound in industrial activity in June (notably, Textiles and other exporters); this also depicts greater demand from Agriculture amid harvesting of wheat and delayed sowing of Kharif crops (typically April-May). Despite rising demand from the Power sector, FO sales fell 59% yoy (down 21% mom), possibly due to shortage of available inventory.

In June, PSO made further gains in overall market share, up 10ppt mom to 52% (from 42% in May and 48% in June 2019), thanks to 10ppt / 8ppt increase in Mogas / HSD market shares to 49% / 59%. This is impressive and probably reflects that PSO replenished its inventory better than other OMCs in May-June. The combined market share of the four OMCs we track (PSO, SHEL, APL, and HASCOL) rose further to c.73% in June (from 66% in May), where shares of SHEL and APL were steady at c.7% and c.10% respectively, while HASCOL lost ground (its share halved mom to c.4%). Notably, Total-Parco (including previously Caltex pumps) and a relatively new OMC, GO, are selling more retail fuels than both SHEL and APL.

During FY20, overall industry sales declined 12% yoy to 16.3mn tons (ex-FO 6% lower yoy). HSD sales fell 9% yoy to 6.5mn tons while Mogas sales fell a modest 2% yoy to 7.3mn tons. Note that prices of HSD and Mogas were 5% and 10% yoy higher on average, respectively. They were above PKR100/liter for most of the year (except for April-June). Sharp economic contraction (LSM was down c.9% yoy during July-April) and ultimately lockdowns are also attributed for the lower demand.

The significant jump in sales seen in May-June was majorly because of lifting of lockdown in Pakistan and a precipitous decline in pump-prices. Both impetus are no longer relevant. Prices of petrol and HSD have been raised by more than 25% for July 2020 and they will likely remain above PKR100/liter during FY21, which will be a key deterrent for demand growth, in our view. However, softer inflation and interest rates, together with a potential rebound in LSM, are mitigating factors. (Intermarket Securities Limited.)

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