The oil consumption in local market has increased by 26 percent to 1.8 million tons in the month of October 2011.

"The growth was primarily led by recovery in Furnace Oil (FO) sales and seasonal up tick in high speed diesel (HSD) sales volumes," Atif Zafar, an analyst at JS Global Capital said.

However, on a year-on-year basis, oil sales were decreased by 5 percent owing to high base of last year, he added.

Cumulatively, oil consumption stood at 6.8 million tons during the first four months of FY12, up by 3 percent on year-on-year basis

During this period, Pakistan State Oil (PSO) sales dipped by one percent on year-on-year basis, while Attock Petroleum Limited (APL) registered an increase of 42 percent. "We expect FO volumes to sustain in coming months owing to a decline in Hydel power generation capacity in the winter season," he said.

The FO sales increased by 48 percent on month-on-month basis owing to suspension of fuel supplies to power utilities on account of non-payment of dues in September 2011. HSD volumes witnessed a seasonal up tick amid the beginning of the sowing period for the Rabi crop, increasing by 30 percent on month-on-month basis.

PSO gained the most, with sales rising by 40 percent on month-on-month basis, followed by APL's growth of 26 percent. However, overall industry was down by 5 percent in October 2011 when compared to the same month last year.

To recall much of the displaced demand of July 2010 and August 2010 and inventory pile up ahead of the resumption of power plants were witnessed in October 2010.  APL continues to benefit from expansion of its distribution network, with sales rising by 39 percent on year-on-year basis. On the other hand, PSO witnessed a decline of 5 percent.

The overall industry sales were recorded at 6.8 million tons during the four months of FY12, up 3 percent on year-on-year basis.

PSO sales witnessed a meager fall of one percent on year-on-year basis, while APL offtake increased by 42 percent. As a result, PSO market share dropped to 64 percent from 67 percent previously, while APL's share augmented to 8 percent from 6 percent earlier.

"We expect oil consumption to stand in the vicinity of 20.9 million tons in FY12, up 5 percent from last year," Atif said.

"Moreover, recent increase in margins of regulated products along with rising margins on FO amid recent up tick in international oil prices affirms our investment case for PSO and APL," he added.

PSO trades at an FY12E PE of 3.4x, while APL is available at 6.3x its earnings.