Pakistan's Oil Marketing Companies face challenges in FY24

Pakistan's Oil Marketing Companies (OMCs) encountered a tough year in FY24, with a significant decrease in sales volumes due to economic and operational hurdles. Total sales dropped to 15.28 million tons, an 8 percent decline from the previous fiscal year, marking the lowest volume in almost two decades.

However, there was a positive turn in June 2024, as sales reached a 19-month high. This improvement was driven by lower fuel prices and increased seasonal demand, especially in Motor Spirit sales, which saw a notable increase.

On the other hand, High Speed Diesel sales declined in June as the harvesting season ended, showcasing the seasonal aspect of diesel demand. Furnace oil sales surged in June, attributed to the heightened power generation requirements during the summer.

The OMC sector's performance in FY24 was influenced by several factors, including a slower economic recovery post-COVID-19, high inflation, reduced industrial activity, and competition from smuggled fuel. The presence of illegal fuel further decreased official sales volumes, creating unfair competition for legitimate market participants.

Company-specific performance varied, with those adapting quickly to market changes demonstrating better resilience. Strategic adjustments and economic stabilization are anticipated to lead to a modest recovery in FY25 for the OMC sector.

Overall, FY24 presented significant challenges for Pakistan's OMC sector, underscoring the necessity for regulatory measures and enforcement to address the impact of smuggled fuel and support lawful market players.