Karachi, April 05, 2022 (PPI-OT): Relief Package induces strong recovery in Mar-2022
OMC sales for Mar-2022 recovered to 1.82mnMT, rising by 23% YoY and 19% MoM as sales of FO offtake rose for power generation in face of slowdown in RLNG imports and Relief Package induced demand from capped MS and HSD prices.
HSD sales rose 17% MoM in Mar-2022 to 0.69mnMT, after falling 20% in the previous month; where demand was primarily led by the Agriculture and Transport sector. Whereas, FO sales also grew 27% MoM, largely attributable to the demand from IPPs.
A likelihood of discontinuation of Relief Package has emerged from the recent political development. This may likely push MS and HSD prices to new record highs, likely above Rs200/litre, as the upcoming caretaker government plans to remove PDC and resume PDL and GST.
POL sales rise 19% MoM
OMC sales for Mar-2022 recovered to 1.82mnMT, up 23% YoY and 19% MoM as sales, that witnessed a dip in previous month of Feb-2022, recovered in nearly all POL items. Key contributing factors are 1) higher FO offtake for power generation in face of slowdown in RLNG imports and 2) Relief Package induced demand from capped MS and HSD prices. Recall, the decline in HSD offtake during Feb-2022 was largely owing to slower demand from Agriculture and Power sector. The POL product sales for 9MFY22 now stand at 16.27mnMT for Pakistan, higher by 15% YoY, led by all-around recovery in nearly all POL items’ demand.
Wide recovery in Mar-2022
HSD sales rose 17% MoM to 0.69mnMT, after falling 20% in Feb-2022; where, we believe that the demand was primarily led by the Agriculture and Transport sector. On the other hand, FO sales also grew 27% MoM, which is largely attributable to the demand from IPPs, encouraged by the government to cover up for the loss in RLNG imports as well as to ensure the refineries are able to offload excess FO inventory. MS sales also recovered significantly by 19% MoM to 0.77mnMT as the Relief Package continued to elevate demand for retail fuels.
Market share trends in Mar-2022
PSO sales jumped faster than its peers, bringing its market share up to 52% for Mar-2022 as it continued to make up for the loss of share by HASCOL. With a significant jump in PSO sales as compared to the industry, aided by its nationwide sales network to be able to cater to loss in sales by any peer, the company now holds 50% market share for overall POL product demand in the country, as per the data for 9MFY22.
After PDL, PDC also seems like a tall order
Newsflows indicate an alarming situation of an emerging diesel crisis as demand will rise from Agriculture sector for harvesting season. Moreover, under the Relief Package, Price Differential Claims (PDC) of Rs24.07/litre and Rs41.43/litre was approved on MS and HSD, respectively till next POL price notification on 15 Apr 2022.
During 9MFY22, Pakistan’s MS and HSD daily demand has averaged at 33.15mn litres and 27.86mn litres which roughly translate into a daily run-rate requirement of Rs1.95bn on account of PDC. Considering the fact that Petroleum Development Levy (PDL) and GST collection was discontinued from mainstream fuels, PDC had started to seem like a tall order.
With recent political update on dissolution of assemblies, clarity over Pakistan’s macroeconomic sustainability is required, and a likelihood of discontinuation of Relief Package has emerged. This may likely push MS and HSD prices to new record highs, likely above Rs200/litre, as the upcoming caretaker government decides to remove PDC and resume PDL and GST collection. This will effectively stand negative for outlook of POL demand as well as inflation.