LAHORE - The consumption of furnace oil in the country has jumped by 11 percent in Nov, as the power plants, including IPPs, have been forced to switch over to oil for generation of their electricity following the gas supply suspension to them. Likewise, the sale of Motor Gasoline (MOGAS) also surged by a significant 34 percent owing to increased gas loadshedding in the country. Overall, oil consumption has reached 8.4 million tons during 5MFY12, showing a rise of 5 percent. According to the provisional oil sales number for November 2011, oil consumption in the country increased by 11 percent annually. High Speed Diesel (HSD) volumes recorded an impressive growth of 13 percent YoY. It is believed, this increase is mainly due to low base of last year. Recall that unprecedented rains/floods had subdued agricultural activities last year. Company-wise breakup reveals, Attock Petroleum (APL) continues to outperform the industry. The company recorded a growth of 59 percent YoY in November 2011. Pakistan State Oil (PSO) also posted an impressive growth of 15 percent YoY. An energy expert, Syed Atif Zafar, observed that the oil and gas sector has gained 7 percent since Oct 1, 2011 versus decline of 2.4 percent. He believes the rally in the sector has been largely driven by the discovery in Nashpa-2 and expectations of potential flows from Domial, Zin and Makori. In his view, the market is yet to fully price in the positive impact of higher international oil prices and rupee depreciation in the E&P stocks. Arab Light crude (benchmark for Pakistans oil producers) has averaged at US$107/bbl YTD vs. consensus oil price assumption of US$95/bbl (JS estimate also US$95/bbl). Hence, we expect potential upgrade in consensus earnings estimates for E&Ps on the back of increase in oil price assumption. We have run sensitivity for higher oil prices and believe, if Arab Light crude averages at US$100/bbl vs. US$95/bbl, the sectors profitability is likely to improve by 2-5 percent. The Arab light crude oil prices in FY12 has so far averaged at US$107/bbl compared to US$78/bbl in the corresponding period last year. More importantly, the average is 12 percent higher than consensus oil price forecast for FY12. The fears of a potential slowdown in global economy amid US and Europes debt concerns had led to conservative oil price assumptions. However, supply side issues have kept oil prices firm. Massive currency adjustments around the globe (Indian Rupee down 18 percent, Brazilian Reais down 18 percent and Russian Rubles down 14 percent) against US$ hints at a possible one-off adjustment in Pak Rupee as well. PKR in FY12 has so far depreciated by 4 percent inline with our full year estimate. Further depreciation of PKR poses another upside to our earnings forecasts. As per our estimates, 1 rupee depreciation against US$ is likely to improve sectors earnings by 1.5-2 percent.