Price rises drive profits of China's oil producers

Sinopec is expected to lead the way with forecast earnings growth of up to 116pc

China's oil majors are expected to post stellar first-half results starting this week, with net profit forecast by analysts to surge between 70.13 per cent and 116.9 per cent, buoyed by sharp rises in oil prices.

China Petroleum & Chemical (Sinopec) is expected to kickstart the reporting season on Friday with the best expected performance of a 116.9 per cent rise in net profit to 11.78 billion yuan (HK$11.11 billion yuan, according to the consensus of five analysts polled by the South China Morning Post.

Despite oil and gas production growing only marginally year on year to about 133 million barrels in the first half, a 40 per cent rise to US$28.1 per barrel in China oil prices, to which Sinopec's oil sales price are pegged, had powered the company's profits from upstream oil and gas production, analysts said.

Sinopec's realised oil price averaged US$19.96 a barrel in last year's first half.

HSBC Securities analyst Gordon Kwan estimated the company - China's second largest oil producer and Asia's largest oil refiner - to have derived 55 per cent of its earnings before interest and tax (ebit) from upstream operations.

Refining throughput is estimated by Deutsche Bank to have risen 4.1 per cent, distribution of refined oil products 3.2 per cent and chemicals sales 17.6 per cent.