Refining operations fuel gains at oil firms
PetroChina and Sinopec are expected to keep enjoying favourable domestic fuel pricing after profits improve in the third quarter
PetroChina and China Petroleum & Chemical (Sinopec), the country's two largest oil producers and refiners, yesterday posted improved third-quarter results on better refining profitability.
The reports came as analysts expected moderate declines in crude prices to allow a continuation of favourable domestic fuel pricing, which would bode well for the oil majors.
PetroChina posted a 19.4 per cent year-on-year rise in net profit to 29.8 billion yuan (HK$37.7 billion). The result was 2.3 per cent lower than the 30.5 billion yuan average estimate of eight analysts polled by Bloomberg.
Profit growth drivers included a halving of operating losses of oil refining and chemicals production to 4.14 billion yuan and an 83 per cent jump in fuel marketing operating profit to 3.28 billion yuan. A turnaround in the gas distribution business also helped.
The narrower refining and chemical loss was thanks to a reform of the country's fuel pricing system in late March that allowed more timely linkages of domestic prices to overseas levels to better reflect demand and supply.
Better gas distribution profitability was due to a price rise in early July, which pared losses on the import of natural gas.
For the first nine months, net profit grew 9.6 per cent to 95.3 billion yuan, thanks to a 24.8 billion yuan gain booked by its gas and pipeline division in the first half from a stake sale in pipeline assets.
UBS head of regional oil and petrochemicals research Peter Gastreich said that as long as crude prices remained stable or fell modestly, Beijing was likely to have "more accommodating" policy for refiners and "gradually return [profit] margins back to them". New York crude prices have fallen 4.5 per cent since October 10.
UBS tipped Brent crude price to average US$100 a barrel next year and US$95 in 2015, due to higher North American supply and weak global demand.
Sinopec posted a 20.2 per cent year-on-year increase in net profit to 22 billion yuan, largely because of a 113 per cent jump in refining operating profit to 6.4 billion yuan.
The result was 14 per cent higher than the mean estimate from analysts of 19.3 billion yuan.