Refining giant Sinopec Corp sees China's diesel and gasoline demand growing more in the second quarter than in the first three months of 2023, a trend set to bolster the firm's profitability further this year.
Vice President Huang Wensheng told investors and media that China's apparent refined fuel consumption had expanded 6.7% on the year in the first quarter with the economy recovering following Beijing's removal of COVID controls.
Improving refined margins, expanded fuel sales as well as higher natural gas prices helped offset downward pressure from lower global oil prices that led to a 12% year-on-year decline in Sinopec's first-quarter net income, company executives said at the earnings briefing.
Sinopec, the world's largest refiner by capacity, recorded 17.5% year-on-year growth in refining margins in the first quarter to $8.70 a barrel, Chief Financial Officer Shou Donghua said.
While domestic refined sales expanded 8.5% during the period, Sinopec also cashed in on a lucrative export market raising fuel exports by 112% on the year, Shou added.
The growth in domestic fuel sales contrasted with a 3% decline in its crude runs, as Sinopec stepped up buying fuel from independent refiners by nearly 30%, Shou said.
Chinese independent refiners, also known as teapots, have benefited over the past few years from discounted crude oil from Iran, Venezuela and more recently Russia amid western sanctions, oil traders and analysts said.
Sinopec's chemicals department remained under pressure from competing new supplies and a tepid demand recovery, Shou said.
Newly launched refinery complexes - privately controlled Jiangsu Shenghong Petrochemical and PetroChina's Guangdong Petrochemical - have added to surging supplies of petrochemicals from mega private refiner Zhejiang Petrochemical Corp and Hengli Petrochemical that started just a few years ago.
Sinopec, which also produces chemicals from coal, a business accounting for 10% of its chemicals sector, is advancing plans to invest in coal mines in northern China's Inner Mongolia region, Vice President Huang said, without elaborating.
