China Oil Majors See Refining Gains as Pricing Driven by Market

China Petroleum & Chemical Corp. (386), Asia’s biggest refiner, profited from crude-processing for the first time since 2011 while PetroChina Co. cut refining losses as China moved to market-driven pricing of its energy needs.

China Petroleum, or Sinopec, reported a 2.2 billion-yuan ($357 million) operating profit from refining in the three months through March, compared with a 9.2 billion-yuan loss a year earlier, the company said yesterday in a statement. PetroChina, the nation’s biggest oil producer, saw refining losses narrow to 1.56 billion yuan from 8.84 billion yuan.

China, the world’s second-largest oil user, has shortened its so-called price-adjustment window for fuels to 10 days from 22 to help refiners more closely reflect changes in the global cost of crude. Refining and chemicals represent about 42 percent of PetroChina’s revenues, and about 64 percent at Sinopec.

“A more transparent and market-based pricing mechanism will clear many uncertainties over Sinopec and PetroChina’s refining businesses, and make operations of the sector more predictable,” said Wu Fei, an analyst at Bocom International. “Sinopec and PetroChina share prices have the potential to rise once investors are convinced that the refining business is a profit contributor rather than a dragging-down factor.”

PetroChina’s losses shrank even as demand weakened amid slowing economic growth, it said. China’s growth rose 7.7 percent in the first quarter, below forecasts, trailing the fourth quarter’s 7.9 percent expansion.

Fuel Prices

Over the past three quarters, the government has raised fuel prices three times and cut them twice, leaving prices broadly higher as inflation fell to its lowest level since January 2010, helping refining margins. Government caps on fuel prices, designed to keep inflation in check, have proved a drag on earnings for the two refiners in recent years.

Sinopec’s net income rose to 16.7 billion yuan, or 0.19 yuan a share, last quarter from a restated 13.4 billion yuan, or 0.15 yuan, in the previous period, the Beijing-based company said.

PetroChina’s net income fell to 36 billion yuan, or 0.20 yuan a share, from 39.2 billion yuan, or 0.21 yuan, a year earlier, it said in a statement.

Crude-oil output at Sinopec rose 0.8 percent to 82.2 million metric tons, while its realized oil price declined 6.9 percent to $98.83 yuan a barrel, according to its statement. Gas output climbed 14 percent to 163 billion cubic feet, and crude- processing rose 5.9 percent to 58.7 million tons.

PetroChina Production

PetroChina’s oil and gas output advanced 2.8 percent to 355.3 million barrels of oil equivalent. Crude-oil production reached 231 million barrels, an increase of 1.8 percent from a year earlier. The company’s average realized crude price was $103.08 a barrel, down 2.3 percent.

“Due to the macroeconomic situation, there was weak demand for refined products and the chemicals market remains in a downturn,” PetroChina said.

Sinopec shares gained 2 percent to close at HK$8.53 yesterday before the earnings announcement. PetroChina gained gained 1.4 percent to HK$9.69.

To contact the reporters on this story: Benjamin Haas in Hong Kong at; Aibing Guo in Hong Kong at

To contact the editor responsible for this story: Jason Rogers at

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