OMC Sales Surge 26% as Summer Travel Begins

Karachi, Volumetric offtakes for the Oil Marketing Companies (OMC) sector reached 1.39 million tons in May 2024, marking an increase of 26% month-on-month and 7% year-on-year. This rise was driven by price elasticity of fuel sales and a seasonal spike in travel demand.

According to AKD Securities Limited, the decline in prices for Motor Spirit (MS) and High-Speed Diesel (HSD) by PKR 26 and 20 per liter, respectively, since mid-April 2024 contributed significantly to the sales increase. The onset of the summer holiday season and higher HSD consumption due to delayed Kharif sowing and Rabi harvesting further bolstered demand. Residual Fuel Oil (RFO) sales also saw a monthly uptick of 129%, though they were down 24% year-on-year, likely due to power plants stocking up in anticipation of higher summer generation demand.

Jet fuel offtakes rose 16% year-on-year, driven by increased seasonal air travel, though they saw an 11% month-on-month decline. Pakistan State Oil (PSO) maintained a dominant market share of over 99% in the jet fuel segment for May.

Despite the monthly rise, cumulative OMC sales for the first 11 months of the fiscal year 2024 remained depressed at 13.83 million metric tons, a 9% year-on-year decline. This contrasted sharply with figures from the COVID-19 period, when sales hit 14.75 million metric tons for the same timeframe in fiscal year 2020. The ongoing economic slowdown, elevated inflation, lower large-scale manufacturing activity, and fuel smuggling from Iran due to price differentials were significant contributing factors.

Attock Petroleum Limited (APL) emerged as an outperformer in May, with offtakes increasing by 39% month-on-month and 14% year-on-year, largely driven by HSD and RFO sales. PSO also saw its volumes increase by 19% month-on-month and 11% year-on-year, boosting its market share to 47.9% in May 2024.

Overall market share for smaller players stood at 13.7% in April 2024, a slight increase from the previous month. The Petroleum Development Levy (PDL) collection was estimated at PKR 890 billion for the first 11 months of fiscal year 2024, surpassing the budgeted target of PKR 869 billion for the full year. The levy, averaging PKR 59 and 57 per liter for MS and HSD, respectively, was a significant contributor to this collection despite a 3% year-on-year decline in retail fuel offtakes.

Looking ahead, modest recovery in OMC sales of 4-5% is anticipated for fiscal year 2025, driven by increased agricultural activity and improved large-scale manufacturing and transport sectors. However, potential additional levies and an 18% sales tax on petroleum products recommended by the International Monetary Fund (IMF) could impact the industry and domestic inflation.

The projected full-year industry offtakes for fiscal year 2024 are around 15.4 million tons, compared to 16.6 million tons in fiscal year 2023.