Despite the fall, the profit is still Sinopec s best quarterly earnings in a year, helped partially by Beijing s 4-4.5 percent increase in state-set gasoline and diesel prices in April.
The drop in the second quarter was partly due to a high base of comparison from the same period a year ago, when refining margins hit a record after Beijing implemented two fuel price increases amid falling crude oil prices.
The international crude oil price in the second half of 2010 is expected to continue to fluctuate within a certain range, while domestic demand for both oil products and chemical products is expected to maintain its steady growth, Sinopec said in a statement.
In the second half, Sinopec is targeting total domestic sales volume of oil products at 68.15 million tonnes. The firm, China s second-largest oil producer, plans to process 102 million tonnes of crude oil and produce 21.54 million tonnes of crude oil.
Since the fourth quarter of 2009, refining margins in China have suffered as state-set prices for oil products such as gasoline and diesel have failed to keep pace with crude s increases.
That disconnect is especially tricky for Sinopec, which has the largest sales and distribution network for refined products in China, but has to buy more than 70 percent of its crude on the world market.
Unlike their global peers Exxon Mobil (XOM.N) and Royal Dutch Shell (RDSa.L) that have recently reported higher year-on-year profits because they earn market-driven margins, state-owned PetroChina (601857.SS) and Sinopec (600028.SS) lose money selling fuel at state-capped prices below production costs.
WEAK MARGINS
Sanford Bernstein estimates that Sinopec s refining margins, or the difference between the price refineries pay for crude and the price at which they sell their refined products, stood at $4.20 per barrel in the first half, compared with $8.90 per barrel in the same period a year ago.
Sinopec s (600028.SS) (SNP.N) net profit totalled 19.68 billion yuan ($2.90 billion) for April-June, compared with a restated 21.97 billion a year earlier, it said in a statement to the Hong Kong Stock Exchange.
Analysts had expected a profit of 17.52 billion yuan, according to a poll of eight compiled by Reuters.
Shares in Sinopec have fallen 8 percent so far this year, versus PetroChina s 7 percent slide and CNOOC s (0883.HK) (CEO.N) 8.7 percent gain.
CNOOC said on Thursday that its interim profit doubled to its second best ever, fuelled by higher crude oil prices and a rise in production. PetroChina reports its earnings on Aug 26.
China Chemical Weekly: http://news.chemnet.com/en/detail-1403616.html
