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Sinopec Profits Slump as Refining Suffers from Weak Economy

The China Petroleum & Chemical Corp. (Sinopec) logo at a gas station in Shanghai, China on Friday, August 11, 2023. (Raul Ariano/Bloomberg)

(Bloomberg) -- Sinopec’s third-quarter profits contracted as China’s biggest oil refiner increasingly finds itself under pressure from the nation’s economic woes and embrace of electrified transportation. 

China Petroleum & Chemical Corp., as the firm is officially known, said its net profit fell to 8.03 billion yuan ($1.1 billion) in the third quarter, from 17.9 billion yuan a year earlier, according to an exchange filing Monday. 

Oil refining is among the sectors that have borne the brunt of China’s economic slowdown, with cumulative losses for the industry totaling 32 billion yuan this year through September. Construction slowdowns have dampened diesel demand, while gasoline has been hit by rising electric vehicle sales, and some petrochemical margins have plummeted as new plants flood the market with supply.

READ: China’s Oil Refiners Face Low Profits, Run Cuts on Fuel Glut

The firm’s key refining unit saw a 539 million yuan loss in the quarter, compared to a 7.6 billion yuan profit in the period last year, Citigroup analysts including Oscar Yee said in a research note. Its chemicals segment reported a 1.7 billion yuan loss compared to a 583 million yuan profit last year.

Global oil prices aren’t helping the company’s drilling operations, either. Brent crude averaged about $79 a barrel in the third quarter, down from $86 in the same period the previous year. Upstream profits fell despite increases in both oil and gas output. Falling oil prices also dragged down the refining unit by eroding the value of inventories, Morgan Stanley analysts including Jack Lu said in a research note.

--With assistance from Catherine Ngai.

(Updates with additional details in fourth and fifth paragraphs)

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