China Petroleum & Chemical Corp. (SNP), or Sinopec, Asia's largest oil refiner by capacity, said Thursday first-quarter net profit rose 25% from a year earlier because of higher oil prices and increasing output, although its refining business recorded a loss due to rising fuel costs.
China Petroleum & Chemical Corp. (SNP), or Sinopec,
Asia
's
largest oil refiner by capacity, said Thursday first-quarter net profit rose
25% from a year earlier because of higher oil prices and increasing output,
although its refining business recorded a loss due to rising fuel costs.
Net profit for the three months ended March 31 was 20.64 billion Chinese yuan
($3.2 billion), up from CNY16.49 billion a year earlier, based on international
accounting standards.
Its first-quarter net profit was CNY20.50 billion under Chinese accounting
standards, up 24% from CNY16.47 billion a year earlier.
Revenue rose 34% to CNY588.8 billion from CNY438.6 billion.
Sinopec joined other major Chinese oil producers in reporting strong
first-quarter results due to a stronger contribution from their oil production
business amid rising crude oil prices, although
China
's oil
demand growth is set to slow this year from 2010.
China
, the
second-biggest oil consumer after the
U.S.
, is
expected to contribute strongly to global oil demand growth this year, even
though the government is starting to tap the brakes on the economy in an effort
to tame inflation.
The International Energy Agency expects Chinese oil demand to grow this year,
from 12.2% calculated in 2010. That reflects a slowing economy, fewer of the
gasoil shortages that were widespread last year and better use of more
energy-efficient equipment, it said.
In response to strong economy growth, Sinopec processed 54.3 million metric
tons of crude oil in the January-March period, up 7.4% from 50.5 million tons a
year earlier. It sold 39.6 million tons of fuel during the quarter, up 14.7%
from 34.6 million tons in 2010.
Sinopec's crude oil output fell 5.8% to 10.98 million tons in the first
quarter, while its natural gas production jumped 29.8% to 3.63 billion cubic
meters.
The average selling price of its oil jumped 19.4% to CNY4,007.03/ton in the
first quarter from CNY3,356.47 a ton a year earlier.
However, Sinopec's refining operation recorded an operating loss of CNY576
million as the price of benchmark Brent crude oil jumped nearly 30% in the
first quarter.
High crude costs have squeezed the margins of
China
's
refiners as the domestic fuel pricing system prevents them from fully passing
on the higher costs to consumers.
Sinopec and PetroChina Co. (PTR) are often under pressure from
Beijing
not
to make any price adjustments in order to keep a lid on inflation. Earlier this
month,
China
raised domestic ex-factory gasoline, diesel and jet-fuel prices by around 5%. The
increase is the fourth in fuel prices, which are controlled by the central
government in
China
,
since October.
PetroChina, the largest listed Chinese oil firm by capacity, said Wednesday its
refining business posted an operating loss of CNY6.13 billion because crude oil
costs exceeded domestic fuel prices, despite a rise of more than 16% in crude
processing volume.
Analysts expect
China
's
refiners to face a challenging operating environment in their refining business
in the second quarter as unrest in the
Middle East
and
North
Africa
drive up fuel prices.
"While a further material rise in oil prices could produce further
refining losses during second quarter of this year, we expect a return to
refining profit in the second half," UBS analyst Peter Gastreich said.
"In any case, a further spike in oil prices is not within our forecast,
and we believe that domestic refined product prices will be raised again next
month," he said.
Seventeen analysts polled by Thomson Reuters said they expected Sinopec's 2011
net profit to rise slightly to an average of CNY75.8 billion from CNY71.8
billion last year.
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