Unipec's President Chen Bo, an industry veteran who helped the company become one of the world's largest oil traders, has been suspended along with the senior Communist Party representative at the company, Zhan Qi, said five sources, who asked not to be identified due to the sensitivity of the issue.
"The government inspectors were looking into the company's operations for the past few years ... one of the problems they found was the severe trading losses in the second half of this year because of wrong market judgement," one of the sources said.
The sources did not refer to any wrongdoing on the part of the two men.
Sinopec, Asia's largest refiner, has appointed two senior executives, Ling Yi Qun and Chen Gang, to manage Unipec, the sources said.
A spokesman for Sinopec had no immediate comment.
Oil prices have fallen more than 30 percent since hitting their highest in four years in October, hurt by oversupply concerns as major producers ramped up output while the United States unexpectedly issued waivers that allowed countries to continue importing Iranian oil.
A sudden widening of the West Texas Intermediate crude spread with Brent earlier this year also led to hefty losses at major traders.
Chen Bo, who rose through the ranks to take on Unipec's top role, started the company's liquefied natural gas (LNG) trading desk.
He also advocated boosting China's crude oil imports from the Americas to help the world's largest oil importer diversify its suppliers.
Oil traders said Chen's removal could create uncertainty at Unipec.
"He's been a key man in the oil trading industry in the past decade," said a veteran oil trader in Asia.
Shares in Sinopec fell as much as 5.9 percent to a two-year low in Shanghai trading.