Sinopec posts record profit on crude rebound

Sinopec employees work on a gas storage facility in Puyang county, Henan province. [Photo by Hu Qingming / For China Daily]

China Petroleum and Chemical Corp, the world's largest refiner by capacity, reported its best half-yearly profits since listing 18 years ago, on better refining profits and a rebound in crude oil prices.

Known as Sinopec, the company's operating profit for the first six months of the year stood at 67.9 billion yuan ($9.98 billion), up 51.3 percent year-on-year. Its revenue rose 11.5 percent year on year to 1.3 trillion yuan. The gains came amid higher crude prices, rising natural gas production and stronger fuel margins.

Higher oil prices also contributed to the growth, with international oil prices surging despite fluctuations in the first six months, with the spot price of Brent crude oil surging 36.2 percent year-year-on to $70.55 per barrel.

According to Li Li, energy research director at market consultancy ICIS China, the rise in crude prices is in general beneficial for refining firms, while Sinopec's market share, cost control and pricing mechanism have contributed to the better performance.

Wang Lu, an Asia-Pacific oil and gas analyst at Bloomberg Intelligence, said Sinopec's revenue, earnings before interest and taxes, and net income may continue to improve in the second half on an annual basis, albeit at a slower rate than in the previous six months after earnings in the first half rose 51.8 percent to 42.4 billion yuan.

"Its exploration and production EBIT may be positive in the second half of this year as oil prices could exceed the company's upstream break-even hurdle of $69-70 a barrel," she said.

"Inventory gains, which contributed 17 percent of Sinopec's refining EBIT in the first half, may be limited in the second half, and Sinopec's oil production may decline 1.4 percent this year while gas output will likely increase 6.7 percent to meet surging Chinese demand."

The company's gas production in the exploration and production segment and nonfuel business in the marketing unit should also post the fastest growth in the second half, she added.

Sinopec said it expects increasing domestic demand for refined oil products and petrochemical products in the second half of the year. Demand for natural gas is also expected to rise rapidly amid the country's energy structure adjustment, it said.

It also warned that processing rates for crude may stay flat in the second half of 2018, amid an oversupply of refined fuels.

Oil major China National Offshore Oil Corp had earlier reported its best profits since 2015, while China's largest oil producer China National Petroleum Corp will publish its results on Aug 30.