Sinopec’s H1 profit up 2.6% on record output despite slumping product demand

BEIJING: China’s Sinopec posted a 2.6 per cent rise in net profit for the first half of the year, it said on Sunday (Aug 25), as record oil and gas output compensated for falling domestic demand for refined fuel and petrochemicals.
China Petroleum & Chemical Corp, as Sinopec is officially known, reported on Sunday a net income of 37.1 billion yuan (US$5.21 billion) for January to June, according to a filing with the Shanghai stock exchange.
Sinopec, the world’s largest oil refiner by capacity, said its oil and gas production hit a record high of 257.66 million barrels of oil equivalent, up 3.1 per cent on the year, led by rising natural gas production.
Gas production was up 6 per cent to 700.57 billion cubic feet, Sinopec previously reported, while crude oil output rose 0.6 per cent on the year to 140.53 million barrels.
Refined product sales rose 2.1 per cent to 119 million metric tons, although the domestic portion of those sales fell 2.5 per cent to 90.14 million tons.
Revenue slipped 1.1 per cent to 1.58 trillion yuan, dragged down by lower sales and prices of diesel and petrochemical products.
“China diesel demand deterioration seems the most concerning,” Citi analysts said in a note.
Diesel sales fell 13.8 per cent and gasoline 0.2 per cent from a year earlier while aviation fuel sales expanded 7.5 per cent.
The company said it is growing its liquefied natural gas (LNG) refuelling and electric vehicle charging businesses to counter challenges posed by weak diesel demand and the shift from gasoline-powered vehicles to electric ones.
China’s apparent natural gas consumption rose 10 per cent year-on-year in the first half, while domestic refined product consumption fell 0.5 per cent year-on-year, Sinopec said.
In July-December, the company forecasts crude oil throughput will be basically flat with the first half at 126 million tons.
In January-June, the company processed 126.69 million metric tons of crude oil, about 5.08 million barrels per day (bpd), it previously reported in a stock filing.
That compared with a 1.7 per cent growth in the first quarter. The slowdown was driven by higher crude prices and tepid domestic fuel demand.
Production of ethylene, a key building block for petrochemicals, fell 5.5 per cent in the first half.
Capital expenditure dropped to 55.9 billion yuan in the period, down from 74.67 billion yuan in H1 2023, as the company reduced outlays for its chemicals business.
Citi analysts warned that third-quarter earnings could be weaker than the second quarter results because of inventory loss and lower oil prices.