Demand for petrol unlikely to pick up: Furnace oil sales rise
By Aamir Shafaat Khan
KARACHI, Nov 15: Petrol sales remain depressed during July-October 2006 recording seven per cent decline over the corresponding period of last year owing to rising conversion of vehicles into CNG and LPG.
However, the overall sales of petroleum products (POL) depicted an increase of 17.80 per cent following 75pc and 7pc rise in demand of furnace oil and light diesel oil (LDO), respectively, during the period under review.
There would be, otherwise, a negative growth in overall figures of POL consumption due to fall in sales of high speed diesel (HSD), JP-1 and kerosene by six, four and five per cent, respectively, as compared to sales during July-October 2005, a report of Invest Cap Research on oil marketing companies reveals.
Petrol sales dropped to 388,000 tons in July-October 2006 as compared to 418,000 tons. A refinery official was of the view that the sales of petrol would remain under pressure as its consumption unlikely to pick up. PARCO has already started exporting surplus petrol and has planned to sale around 80,000 tons to foreign buyers during the current fiscal.
“Unless the government curtails taxes and duties on petrol its consumption will continue to decline,” observes Mohammad Sohail of Jehangir Siddiqui Research, adding “it is likely that the government may keep petrol prices at lower levels during the first half of next year to win support of masses for upcoming general elections”.
But, he added, the likely cut in petrol prices may have very little impact in containing conversion of vehicles to CNG and LPG, besides many car manufacturers are already rolling out fuel-efficient vehicles.
He said sales of motorcycles peaked to over 700,000 units in the last fiscal and were expected to cross over 800,000 units during this fiscal, which is the only hope of the OMCs and refineries.
The government eats up Rs27.29 per litre on petrol in shape of taxes and duties from the current ex-depot price of Rs57.70 per litre.
The number of CNG converted vehicles has reached to over 1.1 million and it continues to rise. Over 80pc of locally-assembled cars, being booked by customers, are fitted with CNG kits.
Khurram Shahzad of Invest Cap stated in his report that total oil consumption in July-October 2006 stood at 5.515 million tons as compared to 4.68 million tons the same period last year, up by 17.80pc.
He said furnace oil sales rose to 2.33 million tons from 1.33 million tons because of rising demand from Wapda, Hubco and IPPs. Fuel oil demand climbed due to temporary gas shortages and relatively low water availability for power generation purposes. Demand of LDO up by seven per cent in the last four months due to greater agricultural activities.
Furnace oil import is likely to take place in next two months while diesel import appears unlikely as local refineries are reported to have surplus supply of high speed diesel, he said.
With the water on mountains freezing in winter, he expected that furnace oil demand would gradually rise in the coming months.
As the Rabi season starts, LDO and HSD volumes should also gain their strength back. Jet fuel demand is likely to rebound with the Hajj season just round the corner. The continuity of relief operation will also play its role. As winter sets in, particularly in northern and quake-hit areas, kerosene demand is also likely to shot up in coming months, he added.
