Sinopec Profit Triples as Refining Outweighs Oil's Plunge

  • Refining business benefits from China's $40/bbl price floor
  • Oil, gas output drops to 2.7%; refining output falls 2.4%

China Petroleum & Chemical Corp., Asia’s biggest refiner, posted a threefold increase in profit as the drop in oil prices was outweighed by the benefit of improved refining margins.

Net income at the Beijing-based company known as Sinopec rose to 6.66 billion yuan ($1.03 billion), compared with 2.17 billion yuan a year ago, according to a statement to the Hong Kong stock exchange Thursday.

China announced in January that fuel prices wouldn’t be adjusted when oil falls below $40 a barrel in an attempt to support the domestic energy industry and curb pollution. The policy boosted domestic refining margins during the first quarter to $16 a barrel, a 45 percent increase from the same period a year earlier, according to researcher ICIS China. The country’s product exports slipped in the first two months as it became more profitable to sell fuels at home.

“Sinopec benefited a lot in the first quarter from very low crude prices and the fuel price floor set by the government,” Li Li, an analyst with ICIS China, said by phone from Guangzhou. “The company will probably be unable to enjoy such good refining margins in the second quarter with higher crude cost.”

Sales dropped 13 percent to 413.8 billion yuan in the period, while oil and gas output fell 2.7 percent to 114.7 million barrels of oil equivalent. Total refining output fell 2.4 to 57.2 million tons. Operating profit from refining swung to a 13.4 billion yuan gain from a loss the year earlier.

Sinopec last year outperformed its state-owned rivals PetroChina Co. and Cnooc Ltd. as profit from oil refining helped offset the impact from oil’s plunge.

— With assistance by Guo Aibing, and Jing Yang

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