Chinese refining giant Sinopec Corp. has reportedly noted a surge in demand for gasoline and diesel across China in the current quarter, as opposed to the first three months of 2023. The trend is anticipated to contribute to the firm’s profitability in the coming months.

According to Chief Financial Officer of Sinopec, Shou Donghua, the company recorded 17.5% y-o-y rise in refining profits in Q1 to USD 8.7 per barrel. The local refined sales increased 8.5% during the period. He further added that Sinopec also gained from the lucrative export sector with 112% yearly raise in fuel export.

China’s evident refined fuel consumption grew 6.7% on the year in the first quarter, owing to economic recovery after the removal of COVID restrictions in Beijing, observed Huang Wensheng, VP of China Petroleum & Chemical Corp., in an investor meet.

Notably, boost in fuel sales, dearer natural gas prices, and swelling refined margins have helped Sinopec to counter downward pressure from declining global oil prices, which caused the company’s Q1 net earnings to fall by 12% on year.

However, the domestic fuel sales contradicted with a drop of 3% in the firm’s crude runs, as it augmented fuel purchase from independent supplier by 30%. These individual refiners, also called teapots, have profited in the recent years from discounted crude oil from Venezuela, Iran, and Russia with midwestern sanctions.

There has been a tremendous surge in petrochemical supplies from mega private refiners like Hengli Petrochemical and Zhejiang Petrochemical Corp., along with newly launched private refineries like PetroChina's Guangdong Petrochemical and Jiangsu Shenghong Petrochemical.

Shou reportedly cited that the chemical department at Sinopec was struggling amidst the competition from new supplies and a slow demand recovery.

Based on the statement of industry insiders, it is speculated that Sinopec is planning to invest in coal mines in Inner Mongolia region of northern China, as the company uses coal to produce chemicals.

Source Credit: https://www.reuters.com/business/energy/sinopec-sees-chinas-q2-refined-fuel-demand-recovering-more-than-q1-2023-04-28/