OMCs – Fueling fragile recovery

With total petroleum sales climbing by 4 percent year-on-year to 11.77 million tons, Pakistan’s oil marketing sector kept its slow recovery in the first nine months of the fiscal year 2025 (9MFY25). Though small, this rise marks a departure from the downturn seen in the previous fiscal year, which was characterized by depressed demand resulting from high inflation, Iranian petroleum product smuggling, and low industrial activity. A more stable macroeconomic environment, lower fuel costs, and tougher enforcement policies against smuggling—which re-directed quantities back into official channels—supported the improvement in 9MFY25.The rising off take of fundamental fuels—Motor Spirit (MS) and High-Speed Diesel (HSD)—which together accounted for the bulk of the industry’s sales—was a primary cause of this increase. While HSD showed a greater increase of 9 percent during 9MFY25, MS sales grew by 4 percent year-on-year. Mostly, these increases may be ascribed to structural and seasonal elements. In particular, March 2025 witnessed gasoline sales rise by 5 percent year-on-year and 7 percent month-on-month. Higher intercity travel over the Eid holidays, more consumption during Ramadan, and longer working days in March as compared to February help to explain the substantial month-on-month increase in March. From a pricing standpoint, the drop in retail gasoline prices over the review period also greatly helped sales to recover. While HSD dropped 9.7 percent in March 2025, the average price of MS dropped 8.6 percent year-on-year. Furthermore, attempts to reduce the flow of illegally imported Iranian fuel by tighter border restrictions were quite important for the offtake of locally sold goods.The record-high sale of High-Octane Blending Component (HOBC) marked one of the most noteworthy March changes. Although the levy was raised by Rs20 per litre beginning in April, which may influence future volumes, aggressive discounting at some fuel stations and a reduced Petroleum Development Levy (PDL) drove this mostly.Still, the weakest element in the portfolio of OMC was furnace oil (FO). Year-on-year sales of FO dropped 39 percent during 9MFY25. Though FO volumes in March show a 22 percent year-on-year increase, the overall trend indicates a structural decrease in the relevance of the product inside the national energy balance.Representing a 5 percent year-on-year gain, the general sales performance in March 2025 reflected the larger trend observed during the fiscal year thus far. Sales rose by 7 percent sequentially from February 2025, which had fewer calendar days than last year. Product-wise, MS sends grew by 4 percent month-on-month, HSD volumes surged by 14 percent, and FO barely changed by 2 percent. Though the OMC sector faces difficulties on the volumetric front in 1HFY25 and an 11 percent drop in sales income resulting from lower retail fuel prices, profitability notably improved. A clear cut in finance expenses helped to support this increase in profitability.Declining world crude oil prices are projected to cause even more cuts in domestic petroleum product pricing in the next quarters. This, together with bettering inflation dynamics and a slow increase in economic activity, is probably going to preserve or even increase demand for MS and HSD. Supported by declining financing conditions and increasing consumer confidence, the continuous recovery in vehicle sales also portends favorably for MS consumption. Similar benefits for HSD demand could come from a revival in logistics and agriculture, particularly if diesel prices keep dropping and the enforcement of smuggling rules is still robust. But the government’s aggressive aim for Petroleum Development Levy (PDL) collecting could result in more frequent pricing interventions, therefore compressing profits or influencing demand elasticity should it be passed on to consumers. The structural drop of FO will continue meanwhile as the mix of power generation moves toward coal, renewable energy, and RLNG.

With total petroleum sales climbing by 4 percent year-on-year to 11.77 million tons, Pakistan’s oil marketing sector kept its slow recovery in the first nine months of the fiscal year 2025 (9MFY25). Though small, this rise marks a departure from the downturn seen in the previous fiscal year, which was characterized by depressed demand resulting from high inflation, Iranian petroleum product smuggling, and low industrial activity.

A more stable macroeconomic environment, lower fuel costs, and tougher enforcement policies against smuggling—which re-directed quantities back into official channels—supported the improvement in 9MFY25. The rising off take of fundamental fuels—Motor Spirit (MS) and High-Speed Diesel (HSD)—which together accounted for the bulk of the industry’s sales—was a primary cause of this increase. While HSD showed a greater increase of 9 percent during 9MFY25, MS sales grew by 4 percent year-on-year.

Mostly, these increases may be ascribed to structural and seasonal elements. In particular, March 2025 witnessed gasoline sales rise by 5 percent year-on-year and 7 percent month-on-month. Higher intercity travel over the Eid holidays, more consumption during Ramadan, and longer working days in March as compared to February help to explain the substantial month-on-month increase in March.

From a pricing standpoint, the drop in retail gasoline prices over the review period also greatly helped sales to recover. While HSD dropped 9.7 percent in March 2025, the average price of MS dropped 8.

6 percent year-on-year. Furthermore, attempts to reduce the flow of illegally imported Iranian fuel by tighter border restrictions were quite important for the offtake of locally sold goods. The record-high sale of High-Octane Blending Component (HOBC) marked one of the most noteworthy March changes.

Although the levy was raised by Rs20 per litre beginning in April, which may influence future volumes, aggressive discounting at some fuel stations and a reduced Petroleum Development Levy (PDL) drove this mostly. Still, the weakest element in the portfolio of OMC was furnace oil (FO). Year-on-year sales of FO dropped 39 percent during 9MFY25.

Though FO volumes in March show a 22 percent year-on-year increase, the overall trend indicates a structural decrease in the relevance of the product inside the national energy balance. Representing a 5 percent year-on-year gain, the general sales performance in March 2025 reflected the larger trend observed during the fiscal year thus far. Sales rose by 7 percent sequentially from February 2025, which had fewer calendar days than last year.

Product-wise, MS sends grew by 4 percent month-on-month, HSD volumes surged by 14 percent, and FO barely changed by 2 percent. Though the OMC sector faces difficulties on the volumetric front in 1HFY25 and an 11 percent drop in sales income resulting from lower retail fuel prices, profitability notably improved. A clear cut in finance expenses helped to support this increase in profitability.

Declining world crude oil prices are projected to cause even more cuts in domestic petroleum product pricing in the next quarters. This, together with bettering inflation dynamics and a slow increase in economic activity, is probably going to preserve or even increase demand for MS and HSD. Supported by declining financing conditions and increasing consumer confidence, the continuous recovery in vehicle sales also portends favorably for MS consumption.

Similar benefits for HSD demand could come from a revival in logistics and agriculture, particularly if diesel prices keep dropping and the enforcement of smuggling rules is still robust. But the government’s aggressive aim for Petroleum Development Levy (PDL) collecting could result in more frequent pricing interventions, therefore compressing profits or influencing demand elasticity should it be passed on to consumers. The structural drop of FO will continue meanwhile as the mix of power generation moves toward coal, renewable energy, and RLNG.

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