China Petroleum & Chemical Corp., the world’s biggest oil refiner, posted a 22% decline in profit for the first half of the year as oil’s collapse overpowered the boost from cheaper crude used to make fuels and chemicals.
Net income dropped to $3 billion, the Beijing-based company known as Sinopec said in a statement to the Shanghai stock exchange on Sunday. Revenue slumped nearly 16% to $132 billion, the company said. Bloomberg reported.
China’s economy will continue to grow steadily in the second half of the year, driving domestic demand growth for fuels and chemicals, the company said in its Chinese-language statement on Sunday. The oversupply in the international oil market is expected to continue and international oil prices will remain low and volatile, the company said. One of China’s so-called Big Three oil companies, Sinopec’s earnings compare with a 98% profit drop by rival PetroChina Co., the country’s biggest producer, and the first-ever half-year loss by Cnooc Ltd., its largest offshore explorer.
Oil refiners typically gain when crude slumps since they benefit from cheaper supply costs, though Sinopec is still vulnerable to the price collapse as it’s the country’s third-biggest oil and gas producer. Brent crude, the global benchmark, averaged about $41 a barrel during the first half of the year, down roughly 30% from the same period in 2015. Crude production in the first half of the year dropped 11.4% to 154.2 million barrels, the company said in the statement. In the second half of the year, Sinopec expects crude production at 147 million barrels, with 125 million coming from its domestic fields and the remainder overseas.
Sinopec will raise refining throughput to 120 million tons in the second half of the year, from 115.9 million in the first six months, the company said. China’s oil refiners earlier this year got a boost from a government policy that halts retail fuel price adjustments when oil falls below $40 a barrel, putting a floor under gasoline and diesel prices while crude continued to drop. The rule boosted margins during Sinopec’s first quarter, when net income tripled from a year ago to $1 billion.
