Wedoany.com Report-Mar 25, Sinopec’s full-year profit tumbled 16% amid sluggish demand, with China’s oil consumption likely nearing a peak.

Sinopec's full-year profit tumbled 16 percent amid sluggish demand.

The country’s biggest refiner saw net income fall to 49 billion yuan ($6.8 billion) in 2024 from 58.3 billion yuan a year earlier, according to a filing on Sunday, citing international reporting standards. That compared with analysts’ expectations for a profit of 56.4 billion yuan.

The slump reflects the company’s operational challenges, with nationwide oil usage falling last year. The government is pushing refiners to produce less fuel and more petrochemicals, as the electric-vehicle boom weighs on consumption of diesel and gasoline. Road fuels demand is expected to keep declining this year, according to the International Energy Agency.

The operating profit for Sinopec’s refining business dropped 67% to 6.71 billion yuan.

Global oil prices averaged about 3% less in 2024 than the previous year, with Brent extending declines this quarter as US President Donald Trump pushes his trade war and encourages higher production. While the drop has reduced some costs for Chinese refiners, the contraction in the nation’s property sector, an importer driver of demand, has discouraged processors from raising operating rates.

Sinopec said it plans to cut its annual budget to 164.3 billion yuan this year, from 175 billion yuan in 2024. As the second-biggest Chinese producer, it aims to raise output by 1.3% to 522 million barrels of oil equivalent. And it will cut sales of refined products by 2.7% to mitigate demand weakness, while keeping capacity unchanged.

Meanwhile, the operating loss at the chemicals business increased by 66% from a year earlier to 10 billion yuan. Still, Vice President Huang Wensheng told a briefing in Hong Kong on Monday that Sinopec expects Chinese petrochemicals demand to grow by about 3% a year through 2030, which will support the company’s program of replacing old facilities with new mega complexes.

China aims to maintain nationwide oil output at about 200 million tons a year, while boosting gas supplies to enhance energy security, according to a government plan. Still, the refining sector is expected to face prolonged overcapacity, leading to the phase-out of smaller, unprofitable processors and gas-filling stations.

Gas output in 2024 rose 4.7%, outpacing growth in oil production of 0.3%, Chief Financial Officer Shou Donghua said at the Hong Kong briefing. Shou also said Sinopec’s liquefied natural gas business saw record profits last year.

China has imposed a 15% levy on US LNG in response to blanket American tariffs on Chinese exports. Sinopec has a long-term contract with US supplier Venture Global Inc. beginning next year. “We will see if we have to move the cargoes elsewhere, depending on the US tariffs,” Vice Chairman Zhao Dong told the briefing.

Sinopec’s peers Cnooc Ltd. and PetroChina Co. will report earnings on March 27 and March 30 respectively.