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China’s largest oil refining company, China Petroleum & Chemical Corp., aka Sinopec, processed 126.69 million metric tons of crude oil or 5.08 million barrels per day (bpd) in the first six months of the current year, good for a mere 0.1% Y/Y increase, the company has reported. That compared with 1.7% output growth in the first quarter, pointing to a sharp slowdown in processing in the second quarter thanks to higher crude prices and lackluster domestic fuel demand.
Sinopec reported that total domestic refined fuel sales declined 2.5% year on year to 90.14 million tons, with retail sales falling 4.7% Y/Y to 56.96 million tons.
The latest results mark a continuation of weak results the company has been posting recently. Earlier in the year, Sinopec reported a 13% decline in its 2024 profits due to lower oil and gas prices. The company reported FY 2024 net income of 58.3 billion yuan ($8 billion) compared with 66.2 billion yuan posted in 2022 after oil prices declined 17%. Lower oil prices not only lowered the value of Sinopec’s drilling output, but also cut its crude costs.
Sinopec has seen refining margins shrink due and upstream profits contract while its chemicals business has continued to lose money. Sinopec and many Chinese refiners ramped up fuel production last year as they anticipated booming business following the lifting of COVID-19 restrictions.
Sinopec expects its 2024 capital expenditure budget to clock in at 173 billion yuan, slightly below last year’s 176.8 billion yuan, mainly due to a scale-back in its chemicals segment. The company is looking to maintain modest growth in both output and processing in the current year, with oil production projected to increase by 1% compared to 2023 levels, while refining throughput is set to increase only 0.8%.
Meanwhile, the company expects domestic refined oil product sales to rise 1.6% in the current year compared to a 16% jump in 2023.
The country is on track to maintain relatively strong growth, with the International Monetary Fund recently revising China’s 2024 economic growth up to 5 percent compared with its 4.6-percent forecast in April after Beijing released half-year economic data on Monday. China’s GDP grew 5 percent year on year in the first half of the year, although it moderated to 4.7% in the second quarter. In 2023, the country’s GDP grew by 5.2% in real terms, reaching RMB 126.06 trillion (US$17.5 trillion).
