As Inflation Bites, Petroleum Sales Fall By Half In April

Overall oil sales in Pakistan fell 47% year over year in April to 1.171 million tonnes, while total sales fell 24% to 13.970 million tonnes in the July to April period of FY23.

In April 2023, 72,000 tonnes of furnace oil (FO) were consumed compared to 461,000 tonnes in April 2022, while sales decreased by 16 percent month over month. Sales of FO for the period of July through April in FY23 totaled 1.866 million tonnes, a 40% decrease from the same period in FY22.

In April 2023, sales of petrol fell by 25% YoY to 580,000 tonnes, while they rose by 4% month over month. The total amount of petrol sold in 10MFY23 decreased by 17% to 6.173 million tonnes. On the other hand, diesel sales fell by 50% to 461,000 tonnes in April 2023 from 919,000 tonnes in April 2022, and by 28% to 5.283 million tonnes in 10MFY23. Sales did, however, rise by 16 percent month over month.

Recovery in the sale of diesel during April 2023 from March 2023 was attributed to higher transport activities amid the Eid holidays and harvesting of wheat crops. According to an analyst at Top Line Research:

“During 10MFY23, oil sales were down due to economic slowdown with a decline visible in all major petroleum products. Higher inflationary environments, particularly the prices of petrol and diesel have had a major impact on demand.”

The analyst predicted that oil sales will be weak going forward due to rising inflationary pressure and the government’s inability to reduce oil prices. Besides, the influx of Iranian petroleum products, according to an analyst at Insight Research, also hurt local sales, and the market for furnace oil remained weak because of the country’s weak power production. He said:

“The widespread availability of Iranian diesel, especially in the country’s southern region, is hurting diesel offtake due to a significant price differential between Pakistani and Iranian diesel. Foreign exchange scarcity to import petroleum products is further causing the authorities to turn a blind eye to this issue.”

With Brent currently trading at $75 per barrel, down from an average of $84 per barrel in April 2023, the price of oil is falling globally. The analyst continued by saying that if this pattern holds and the rupee remains stable against the dollar, petroleum prices are anticipated to decrease. This might result in an increase in oil marketing businesses’ sales in the months to come.

Source: Dawn