Sinopec Profits Dip Despite Booming Fuel Demand

China's Oil Giant Navigates Challenging Market

by Victor Adetimilehin

China Petroleum & Chemical Corp (Sinopec), the world’s largest oil refiner by capacity, reported a 9.9% decline in 2023 net profit. This decrease, announced on March 24, reflects a “complicated operating environment and intense competition” faced by the company last year. However, the picture isn’t entirely bleak. While overall profits dipped, Sinopec benefited from a strong rebound in domestic fuel demand, particularly for gasoline and aviation fuel.

Mixed Results for Sinopec in 2023

Sinopec’s 2023 net income of 60.5 billion yuan ($8.37 billion) fell slightly short of performance in 2022, when the company experienced a 6.9% decline. This ongoing downward trend can be partly attributed to volatile oil and gas prices. However, positive signs emerged in the form of a post-pandemic demand surge for transportation fuels.

Sales of gasoline and diesel rose by 14.3% and 6.4% respectively, reflecting increased travel activity within China. Aviation fuel sales witnessed a particularly significant uptick of 49.5%, driven by a rebound in passenger air traffic. These figures encompass both domestic sales and exports, highlighting Sinopec’s ability to capitalize on favorable market conditions in certain segments.

Increased Refinery Throughput and Strategic Investments

Sinopec’s refining operations also yielded positive results in 2023. Refinery throughput climbed 6.3% to a record high of 257.52 million metric tons (approximately 5.15 million barrels per day). The company forecasts a further increase to 260 million tons in 2024. This expansion in refining capacity positions Sinopec to meet anticipated growth in fuel demand.

Looking ahead, Sinopec plans to maintain a focus on exploration and development activities. The company has allocated 173 billion yuan for capital expenditure in 2024, reflecting a slight decrease from the previous year’s figure of 176.8 billion yuan. These strategic investments aim to ensure Sinopec remains competitive in the evolving global energy landscape.

While Sinopec’s overall profit picture in 2023 presented challenges, the company demonstrated resilience by adapting to a complex market environment. A surge in domestic fuel demand and strategic investments in refining capacity position Sinopec for potential growth in the year ahead.

Source: Reuters

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