China’s largest oil refining company China Petroleum & Chemical Corp. aka Sinopec, recorded a 13% decline in its 2024 profits due to lower oil and gas prices. Sinopec reported FY 2024 net income of 58.3 billion yuan ($8 billion) compared with 66.2 billion yuan posted in 2022 with global oil prices17% lower in 2023 compared to the previous year. The lower oil prices reduced the value of Sinopec’s drilling output and also cut its crude costs.
Sinopec’s latest results missed the analyst consensus despite the company seeing a rebound in its key refining margins due to a contraction in its upstream profits while its chemicals business 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. Unfortunately, economic recovery was only tepid, with chemicals like ethylene facing a huge surplus.
Sinopec announced that it expects 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 said it will maintain modest growth in both output and processing in the current year, with oil production projected to increase 1% compared to 2023 levels while refining throughput is set to increase only 0.8%. Meanwhile, the company said it expects domestic refined oil product sales to rise 1.6% this year compared to a 16% jump the previous year.
Beijing has announced that China’s GDP growth will slow down to 5.0% in the current year after growing 5.2% in 2023. Weak consumer and business confidence; mounting local government debt and slowing global growth have been taking a toll on the Chinese economy and depressing investments.
“The recovery from COVID — disappointing as it was — is over. Any true acceleration (this year) will require either a major global upside surprise or more active government policy,” China Beige Book International has said.
By Alex Kimani for Oilprice.com
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