By Colleen Howe
BEIJING (Reuters) -China’s Sinopec posted a 2.6% rise in net profit for the first half of the year 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 ($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% on the year, led by rising natural gas production.
Gas production was up 6% to 700.57 billion cubic feet, Sinopec previously reported, while crude oil output rose 0.6% on the year to 140.53 million barrels.
Refined product sales rose 2.1% to 119 million metric tons, although the domestic portion of those sales fell 2.5% to 90.14 million tons.
Revenue slipped 1.1% 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% and gasoline 0.2% from a year earlier while aviation fuel sales increased 7.5%.
The company said it was 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% year-on-year in the first half, while domestic refined product consumption fell 0.5% year-on-year, Sinopec said.
For July-December, the company forecasts crude oil throughput at 126 million tons, or 5 million barrels per day (bpd), little changed versus 126.69 million metric tons of crude oil, or about 5.08 million bpd in the first half.
That compared with a 1.7% increase in the first quarter. The slowdown was driven by higher crude prices and tepid domestic fuel demand.
Sinopec aims to fine-tune its product mix and boost sales of gasoline and aviation fuel during the second half, when demand is expected to rise due to a pick up in travel during several major public holidays, its chief financial officer Shou Donghua told an earnings call on Monday.
Production of ethylene, a key building block for petrochemicals, fell 5.5% in the first half.
Capital expenditure dropped to 55.9 billion yuan in the period, down from 74.67 billion yuan in the first half of 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.
Sinopec’s Hong Kong listed shares closed up 1.18% on Monday, having risen nearly 25% so far this year, outperforming the Hang Seng index, which has risen 3.3%.
($1 = 7.1244 Chinese yuan renminbi)
(Reporting by Colleen Howe, Beijing newsroom and Alison Lui in Hong Kong; Additional writing and reporting by Chen Aizhu in Singapore; Editing by Lincoln Feast, Mrigank Dhaniwala and Mark Potter)
