Sinopec reports best quarter in years after oil prices rebound

[BEIJING] China Petroleum & Chemical Corp , the country's largest refiner, reported its best quarterly profit in years on strong upstream and refining business, but warned it expects slowing fuel demand in the second half.

Known as Sinopec, the company said in a statement late on Sunday that first-half net income was 41.6 billion yuan (S$8.25 billion), up 54 per cent from the same period a year earlier. That topped its own forecast of 50 per cent profit growth, issued late in July.

The company doesn't give a breakdown for second-quarter results. But according to Reuters calculations based on Sinopec's first-quarter earnings, April-June net income climbed to 22.8 billion yuan from 18.8 billion yuan in the first three months of the yea, the highest since at least the start of 2013.

The stronger earnings came after oil topped US$80 a barrel in May for the first time since 2014, boosted by OPEC-led output cuts and falling Venezuelan and Libyan output, as well as by an imminent drop in Iranian exports as US sanctions return.

Sinopec's bumper results also come as state oil refiners have exported record volumes of diesel and gasoline, grabbing a bigger share of the market as smaller, independent refiners struggle with tough new taxes, a government-led environmental crackdown and crippling costs from the higher crude oil.

The company's shares in Hong Kong were up 1.7 per cent in early trade at HK$7.65 (S$0.30), while the exchange benchmark index was up 1.3 per cent.

Total revenue in the first six months of the year rose to 1.3 trillion yuan, up 12 per cent from a year earlier, amid higher crude prices, rising natural gas production and stronger fuel margins, the statement said.

Second-quarter revenue was 679 billion yuan, according to Reuters calculations.

Still, Sinopec warned on Sunday that it expects fuel sales to drop and processing rates for crude to stay flat in the second half of 2018, amid an oversupply of refined fuels.

The company said it will process 121 million tonnes of crude oil in the second half of the year, the same as in the first half, and its fuel sales will be 90.5 million tonnes, compared to 96.48 million in the first half, it said in a statement to the Shanghai Stock Exchange.

"Sinopec ramped up efforts to sell fuel in domestic market by giving a discount especially for diesel in the second quarter. The discounts have boosted sales volume but hurt revenue," Eyebright Securities said in a research note last week after the company gave a results forecast.

Crude oil production in the first half fell 1.6 per cent from the same period a year earlier to 143.6 million barrels while natural gas output was up 5.3 per cent from a year earlier to 476.2 billion cubic feet, Sinopec said.

Sinopec will produce 146 million barrels of crude oil in the second half of 2018, it said.

Refined product sales in the first half were down 2.1 per cent from the same period a year earlier.

Chinese offshore oil and gas company CNOOC Ltd last week reported its best profits since 2015.

China's largest oil producer PetroChina, will publish their final first-half results on Aug. 30.

REUTERS