Sinopec's Quarter Profit Rises, Outlook Gloomy


Top Asian oil refiner Sinopec beat forecasts with a 5.5 percent rise in third-quarter earnings, even as high oil prices squeezed its refining business into the red again, but it may face a worsening fourth quarter.

Global crude oil prices jumped from around $70 in early July to more than $80 in September, before striking an all-time high above $90 this month. High crude prices tend to favour crude oil producers while hurting refiners.

Refining is Sinopec's core division. It was pushed back into the red in the third quarter after oil prices rebounded, and analysts say it could post substantial losses in the fourth quarter.

Sinopec, which vies with PetroChina and CNOOC to supply the world's second largest oil market, said on Tuesday its net profit was 13.63 billion yuan (US$1.82 billion) from July to September, versus a restated 12.92 billion yuan a year earlier. 

The result, based on international accounting standards, beat a forecast of 11.6 billion yuan, according to three analysts polled by Reuters.

Red-hot global oil prices have hit output at loss-making Chinese refineries and China is rationing diesel at the pump in several booming coastal provinces in the widest-scale rationing seen since 2003.

Now investors are looking for any hint that Beijing could raise state-capped oil product prices and are weighing up the odds of Sinopec getting another government subsidy this year.

Beijing gave Sinopec a $640 million rebate in 2006 after a $1.2 billion handout in 2005 as an antidote to the painful cost of crude.

China last raised fuel prices 17 months ago and its top economic planning officials have repeatedly signalled that a near-term price increase was not on the cards despite record-high oil.

The top Asian oil refiner posted an 8 percent rise in third-quarter earnings based on Chinese accounting standards to 13.76 billion yuan for the quarter ended in September, up from a restated 12.76 billion yuan a year earlier.

Shares in Sinopec rose 12 percent in July-September, lagging PetroChina's 28 percent gain and a 42 percent jump in the index of mainland Chinese stocks listed in Hong Kong

Sinopec trades at 14 times forecast earnings, in line with both BP's and Exxon Mobil's 13.