Karachi: The Oil Marketing Company (OMC) sector in Pakistan closed Fiscal Year 2024 with an 8% year-over-year decline in total sales volumes, marking the lowest level since FY06. Despite this downturn, June witnessed some recovery, attributed to seasonal factors and price adjustments. Looking ahead, a modest sales growth is expected for FY25, although challenges remain due to potential inflationary pressures and global economic conditions.

According to AKD Securities Limited, the total OMC sales for FY24 stood at 15.3 million tons. The sector faced multiple challenges, including a slowdown in economic activities, decreased demand from the power sector, and the impact of smuggled products affecting local market dynamics. Notably, RFO (Residual Fuel Oil) sales plummeted by 50% year-over-year due to reduced demand from power generation units, leading to increased exports of discounted RFO. Conversely, positive trends were seen in Jet Petroleum (JP) and High Octane Blending Component (HOBC) sales, which rose by 7% and 23%, respectively, benefiting from a muted price differential and increased air travel.

APL (Attock Petroleum Limited) outperformed its peers with a 4% year-over-year rise in ex-RFO offtakes, particularly strong along the northern Motorways and in rural Punjab, a key agricultural region. For the upcoming fiscal year, AKD Securities projects a 4-5% increase in OMC sales, driven by an upturn in large-scale manufacturing and transport sectors, along with better agricultural activity. However, the anticipated increase in domestic fuel prices and international crude prices might pose significant risks.

The investment outlook for the OMC sector remains cautiously optimistic, with Pakistan State Oil (PSO) identified as a top pick, showing a potential upside of 73% in its target price by June 2025. The sector offers a promising dividend yield, projected at 4% for FY24 and 10% for FY25, making it an attractive option for income-focused investors despite the prevailing uncertainties.