OMC sales: High prices stall momentum

Pakistan’s petroleum sales lost momentum in August, exposing the fragility of July’s strong start. Sales by oil marketing companies fell 3 percent year-on-year and 16 percent month-on-month. Excluding furnace oil, volumes contracted 9. 3 percent year-on-year in Aug-26 and nearly 19 percent from Jul-26. Diesel bore the brunt. High-speed diesel sales dropped down 19 percent year-on-year and 32 percent month-on-month in Aug-26. Petrol held up relatively better, declining 1 percent year-on-year, and 9 percent from Jul-26. Given diesel’s use in freight, farming and industry, its sharper contraction warrants attention. However, one month’s OMC dispatches cannot establish the extent of any slowdown in economic activity. Affordability remains a major constraint. Aug-26 petrol prices were around 26 percent higher year-on-year, while diesel was approximately 36 percent more expensive. Such increases squeeze household travel budgets and raise the cost of moving goods and operating machinery. The relative resilience of petrol suggests that everyday mobility has held up better, while diesel demand has proved more vulnerable to the price shock. Furnace oil moved in the opposite direction. Aug-26 sales were up 429 percent year-on-year and 26 percent month-on-month. The extraordinary growth partly reflects last year’s low base, but also greater reliance on furnace oil for electricity generation amid RLNG supply disruptions. The rise in furnace oil sales reflects gas shortages rather than stronger economic activity. The cumulative picture still looks healthier. During 2MFY27, petroleum sales increased nearly 10 percent year-on-year. Petrol volumes rose about 8 percent, while diesel edged up just over 1 percent during the 2MFY27. Furnace oil sales climbed by more than 5 times during the two-month period. Petroleum sales could grow in FY27, but high fuel prices are likely to keep demand under pressure. Lower global oil prices and a stable rupee could offer relief, although petroleum levies may limit the benefit for consumers. Seasonal farming activity could lift diesel sales but floods could trigger a slowdown, while gas shortages may keep furnace oil demand elevated. A lasting recovery, however, will depend on sustained growth in petrol and diesel consumption.

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