Petroleum Sector Recovery in Pakistan: September 2024 Sales Surge

In recent months, the petroleum sector in Pakistan has shown signs of recovery, particularly in September 2024. This resurgence is noteworthy as it marks a significant turnaround from the challenges faced earlier in the fiscal year. The Oil Marketing Companies (OMCs) reported a remarkable 20 percent year-on-year increase in petroleum sales, with total volumes reaching 1.27 million tons. This growth can be attributed to several factors, including a rise in retail fuel sales, especially for motor spirit (MS) and high-speed diesel (HSD), which saw increases of 22.5 percent and 25.5 percent, respectively.

The increase in demand for petroleum products was largely driven by consecutive cuts in fuel prices, which ranged from PKR 12 to 16 per liter. These price reductions have played a crucial role in boosting sales volumes, making fuel more affordable for consumers. Additionally, improved transport mobility following the monsoon rains and a recovering economy have further fueled this demand. It is important to note that the growth in HSD volumes in September 2024 was also influenced by a low base from the previous year, as the sector had experienced sharp price hikes in September 2023.

However, not all segments of the petroleum market are thriving. Sales of furnace oil (FO) have dropped by 18 percent year-on-year, totaling 69,000 tons. This decline reflects a significant reduction in furnace oil-based power generation, which has been a concern for energy production in the country. Despite the positive trends observed in September, the OMC sector faced considerable challenges earlier in the fiscal year. The total annual sales for FY24 were the lowest in 18 years, amounting to 15.3 million tons, which represents an 8 percent decline from FY23.

Interestingly, the OMC sales began to rebound in June 2024, reaching a 19-month high of 1.45 million tons. This recovery was attributed to reduced fuel prices and a seasonal rise in demand, which continued into August and September. However, the first quarter of FY25 still showed negative growth, particularly for furnace oil, which was down by 39 percent year-on-year. HSD volumes experienced a slight decline of one percent, while MS volumes remained flat.

Looking ahead, the outlook for OMC sales appears cautiously optimistic. A modest recovery is anticipated, supported by falling fuel prices and a resurgence in industrial activity. Nevertheless, challenges remain, particularly with rising Petroleum Development Levy (PDL) rates and geopolitical factors that can influence crude prices. The future performance of the OMC sector will largely depend on how well these external factors are managed, including fuel price volatility and the pace of economic recovery.

While the petroleum sector in Pakistan has shown signs of improvement in September 2024, it is essential for stakeholders to remain vigilant. The interplay of market dynamics, government policies, and global economic conditions will play a pivotal role in shaping the future of petroleum sales in the country. As consumers, it is crucial to stay informed about these developments, as they directly impact fuel prices and, consequently, the cost of living.