Chinese refining giant Sinopec Corp reported a 20.1% decrease in net profit for the first half of the year compared to the previous year, amounting to 35.11 billion yuan ($4.82 billion). This decline was attributed to lower crude prices, despite an increase in refinery output and fuel sales.
Sinopec, the world’s largest refiner by capacity, generated revenues of 1.59 trillion yuan during the six-month period, representing a 1.1% decrease from the previous year.
According to a stock filing, Sinopec processed a total of 126.54 million metric tons of crude oil, marking a 4.8% increase compared to the previous year. Additionally, the company reported an 18.5% rise in refined fuel sales, reaching 116.6 million tons.
The second quarter saw a continued recovery in domestic fuel demand, following a 6.7% year-on-year increase in the first three months. This growth was primarily driven by increased consumption of gasoline and aviation fuel due to higher travel activity.
However, the demand for diesel fuel remained under pressure due to a struggling property sector and reduced trucking caused by weakening merchandise exports.
Chinese refiners, including Sinopec, benefited from the availability of cheap crude oil supplies from Iran, Venezuela, and Russia. Western sanctions forced these producers to sell oil at significant discounts to maintain revenue flow.
While other state majors refrained from purchasing Iranian and Venezuelan oil, Sinopec continued to import Russian supplies, as reported by traders.
During the first half of the year, Sinopec produced 139.68 million barrels of crude oil, a marginal increase of 0.02% compared to the previous year. Additionally, its natural gas output rose by 7.6% to 660.88 billion cubic feet.
The company’s refining margin for the first half of the year was 354 yuan ($48.57) per ton, reflecting a 33.6% decline from the previous year.
Capital expenditure for the first half of the year amounted to 74.67 billion yuan, an increase from 64.65 billion yuan in the previous year.
Sinopec has been focusing on exploring geologically challenging reserves, such as the Bazhong tight gas field and expanding its shale gas acreage in Sichuan.
In terms of stock performance, Sinopec’s Hong Kong-listed shares have increased by 14.4% year-to-date, outperforming the Hang Seng Index, which has experienced a 10.9% decline during the same period.
($1 = 7.2890 Chinese yuan renminbi)
Reporting by Chen Aizhu and Judy Hua; editing by Robert Birsel
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