According to the latest data, Pakistan’s oil sales in August 2023 decreased by 8% compared to the same period last year, reaching 1.40 million tons from 1.52 million tons. The main reason for this decline was the reduced demand for furnace oil (FO) for power generation, as cheaper alternatives were available. However, excluding FO, oil sales increased by 7% year-on-year, as August 2022 had lower sales due to floods that affected transportation. On a month-on-month basis, oil sales increased by 4%, driven by high-speed diesel (HSD) sales, which rose by 11%. In the first two months of fiscal year 2024, oil sales dropped by 7% year-on-year, from 2.97 million tons to 2.76 million tons.
The decrease in oil sales was led by black oil offtakes, which fell by 64% year-on-year to 118 thousand tons in August 2023. This was mainly due to the lower use of FO for power generation during the month. On the other hand, HSD sales increased by 11% year-on-year to 548 thousand tons, as there were no heavy rains that could hamper transportation. Motor spirit (MS) sales also increased by 5% year-on-year to 672 thousand tons.
Among the listed companies, CNERGY had the highest decline in sales of 34% year-on-year in August 2023, followed by SHEL (11%), PSO (8%) and APL (2%). However, HASCOL improved its sales by 27% year-on-year, although this was due to a low base effect. HASCOL also increased its market share from 1.7% in the first two months of fiscal year 2023 to 2.9% in the same period of fiscal year 2024, followed by APL which increased its market share by 27 basis points. Conversely, CNERGY’s market share decreased from 2.9% to 2.1%.
The government has raised the Petroleum Development Levy (PDL) on petrol to PKR60 per liter in the last fortnightly revision. This was because the government increased the prices of MS and HSD by PKR14.91 per liter and PKR18.44 per liter, respectively, due to the increase in global oil prices and the depreciation of PKR against USD. With this revision, PDL on petrol has reached its maximum limit of PKR60 per liter, which was changed in the fiscal year 2024 budget, while on HSD, the current levy rate is PKR50 per liter. The government aims to collect PKR869 billion from PDL in fiscal year 2024.
Insight Securities expect that local fuel prices will continue to rise due to the weakening of PKR against USD. The latest fuel prices were calculated based on a PKR/USD parity of around 300. However, the increase in ex-refinery prices will benefit OMCs with inventory gains. On the demand side, we expect that oil sales will face pressure due to higher prices, lower purchasing power, severe economic slowdown and decline in automobile sales.