KARACHI - The inception of the year CY11 has brought with it dismal oil consumption growth as it declined by 7.6 per cent YoY and 2.1 per cent MoM during January 2011, according to latest OCAC figures. Analyst Khurram Schehzad said increase in the prices of furnace oil, economic slowdown and decrease in transportation activities were the main reasons behind decline in oil consumption. Total oil consumption during Jan-11 clocked in at 1.63 million tons, down 7.6 percent YoY and 2.1 percent MoM. Both Black Oil (FO, LDO) and most of the White Oil products (MS, HSD, Kero, and JP-1) can be held responsible for turning overall monthly growth in to negative. The heavyweights e.g. FO and HSD, sharing 79 percent of the total volume basket, contributed 99 percent to the negative monthly growth in consumption volumes during Jan-11. Demand for Motor Gasoline (MS) and High Speed Diesel (HSD) - two primary transportation products - shrank too despite governments efforts to keep end-consumer prices unchanged at the cost of its levies, and continuing gas load-shedding at the CNG stations. JP-1 also took a sink as Hajj season came to end in Dec-10. Kero volumes, on the other hand, surged by 21 percent MoM as its use in the rural areas heightened amid harsher winters and gas shortages. Harsher winters (leading to lower economic activities) and rising key products prices (heavyweight FO prices up 4.4 percent MoM, 10.3 percent YoY to Rs55,500), is expected to have kept product consumption in check. In addition, high base-effect of Dec-10 volume growth number, when consumption rose in the double-digits (+11% MoM), makes Jan-11 look murky. The total cumulative volume has been on the decline in 7MFY11 amid 1) subdued economic activity due to worst-ever floods hitting the country in 1HFY11, 2) 9 percent average surge in retail prices (though prices of 4 major products have been kept unchanged since Dec-10). The total POL volumes (excl. non-energy) stood at 11.4 million tons in 7MFY11 (2.9 percent decline YoY), due primarily to decline observed in FO and HD volumes contributing 78 percent to industry decline owing to aforementioned reasons. Local refineries contributed 39 percent to POL consumption while 61 percent of the consumption was met through imports. Despite better spreads of late on POL products, refineries overall operations were severely affected by the on-going liquidity issues. As a result, countrys reliance on imported fuels is going up substantially. With 2.9 percent decline in the industry wide volumes during 7MFY11, PSO has observed significant decline in volumes of 11 percent and therefore a considerable cut in its market share (64 percent in 7MFY11, down 621bps YoY during 7MFY11) as the company holds largest chunk of the market pie. Remarkably, SHEL has improved its market share to 15.2 percent (+309bps YoY) in 7MFY11 with a massive 22 percent YoY volume growth (as companys FO volumes improved amid supply contracts with new power plants i.e. NPL and NCPL). APL with its market share consistently on the go, firmed up its market share further to 6.3 percent (+91bps YoY) while recording an encouraging 13 percent YoY growth in volumes during 7MFY11.