The demand for petroleum oil products remained robust despite the uptrend in prices, as wheat harvesting, power generation through oil-fired plants and building of domestic reserves in anticipation of a further hike in international prices generated strong demand in January.

Besides, healthy industrial activities and growing car numbers on roads also contributed to the rising momentum in sales of petroleum products. Overall oil sales surged almost 20% to 1.8 million tons in January 2022 compared to 1.51 million tons in the previous month of December 2021, Arif Habib Limited (AHL) reported on Tuesday. “(High-speed) diesel had a major increase in demand among petroleum products in the wake of wheat harvesting in the country,” AHL Head of Research Tahir Abbas said while talking to The Express Tribune.

Secondly, three major power plants, located in Punjab, ran on diesel due to the widening gas shortfall during winter months. Besides, some other plants ran on furnace oil and its demand picked up as well. Thirdly, oil marketing companies (OMCs) and their dealers (petrol pumps) built inventories during the month in anticipation of a hike in prices of petroleum products in the global as well as domestic markets.

The building of reserves was aimed at making additional profits on likely increase in prices in the domestic market with effect from February 1, 2022. The government, however, decided to keep oil prices unchanged, which “had earlier been expected to increase by Rs12-15 per litre,” he said. The demand for petrol also remained robust in the backdrop of a significant growth in sales of cars and SUVs.

Car sales slowed down, but still remained significant despite the fact that the government took measures to cut imports of luxury cars and restricted bank financing for cars to control the current account deficit (CAD). Sales of diesel increased 20% to 0.74 million tons in January compared to 0.62 million tons in December.

Sales of petrol rose 6.2% to 0.74 million tons in the month under review compared to 0.70 million tons in the previous month. Sales of furnace oil surged 103% to 0.26 million tons in January compared to 0.13 million tons in December 2021. Cumulatively, in the first seven months (July-January) of the current fiscal year 2021- 22, oil sales increased 14.5% to 12.91 million tons compared to 11.27 million tons in the same period of previous year. The growth in demand is mostly seasonal given that wheat harvesting takes place in January.

“The increase in prices of petroleum products in the global and domestic markets is expected to slow down sales, but not turn them negative in the coming months,” he said. He added that oil (the benchmark Brent crude) price rose to multiyear high of $90 per barrel and it is expected to touch $100 for a brief time in the near future. “The price, however, will not stay at that level and will face some correction.

Oil price is expected to normalise over the next two to three months in the international market,” he said. “We have calculated average oil import price for Pakistan at $76 per barrel for current fiscal year 2021-22 compared to $52-53 per barrel recorded in the preceding fiscal year 2020-21,” he said. The growth in demand is expected to keep petroleum products imports, including RLNG, on higher side in Pakistan.