Pakistan’s retail oil market set for double-digit growth in FY26
Sherman Securities forecasts up to 20% rebound in retail fuel sales as government cracks down on smuggling and stabilizes pricing

Haris Zamir
Business Editor
Experience of almost 33 years where started the journey of financial journalism from Business Recorder in 1992. From 2006 onwards attached with Television Media worked at Sun Tv, Dawn Tv, Geo Tv and Dunya Tv. During the period also worked as a stringer for Bloomberg for seven years and Dow Jones for five years. Also wrote articles for several highly acclaimed periodicals like the Newsline, Pakistan Gulf Economist and Money Matters (The News publications)

Pakistan’s retail oil market is poised for a strong rebound in FY26, with projected growth of 13% and potential upside of up to 20%, according to a new report by Sherman Securities.
After peaking at 24.4 billion liters in FY22, the country’s retail oil sales dropped sharply to 18.5 billion liters by FY25, marking a cumulative decline of 24% over the past three fiscal years.
The downturn has been attributed to a combination of macroeconomic challenges, including a near-doubling of local oil product prices under the IMF stabilization program and sluggish economic activity with average GDP growth of just 1.6% from FY23 to FY25.
Adding to the pressure, widespread smuggling of cheaper Iranian fuel across border areas has significantly disrupted formal retail sales, especially for diesel, resulting in an estimated annual revenue loss of PKR 200 billion to the national exchequer.
However, Sherman Securities sees a turnaround on the horizon. “With renewed government efforts to curb smuggling and stabilize fuel pricing, we expect retail volumes to grow by 11% in FY26,” the report stated. When combined with a likely 2% increase in oil marketing companies’ (OMCs) margins — assuming a 5% hike in margins is implemented from the second half of FY26 — the retail segment is expected to register 13% growth.
The report does not rule out the possibility of even stronger industry expansion, projecting up to 19-20% growth if the government approves OMCs’ request for a 15% margin increase by the end of the first half of FY26.
Market potential drawing global interest
Pakistan’s retail oil market has grown threefold over the past five years, reaching PKR 146 billion, largely driven by increases in per-liter OMC margins. This growth has caught the attention of global players.
Despite challenges posed by falling international oil prices, which led to substantial inventory losses and the exit of several smaller firms, the outlook for larger OMCs remains positive.
“With oil prices now stabilizing at lower levels, large players with stronger liquidity, ample storage, and access to low-cost financing are well-positioned to capture additional market share in FY26,” Sherman Securities noted.
PSO set for earnings recovery
State-run Pakistan State Oil (PSO), the market leader, bore the brunt of inventory losses over the past few years. But Sherman Securities anticipates a strong financial comeback in FY26, projecting an earnings per share (EPS) of PKR 110.6, supported by the absence of major inventory losses and a recovering liquefied natural gas (LNG) segment.
The report further forecasts a reduction in PSO’s finance costs — from PKR 33 billion in FY25 to PKR 23.5 billion in FY26 — as circular debt pressures ease and RLNG-related borrowings decline. This, coupled with improved cash flows from the retail segment and lower working capital needs due to subdued oil prices, is expected to bolster PSO’s liquidity position and help reduce its debt burden, currently at PKR 361 billion.
Sherman Securities estimates that the total value of Pakistan’s retail oil market could rise to PKR 167 billion in FY26, outpacing the 4% average growth recorded over the past five years.
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