BEIJING, July 9 /Xinhua-PRNewswire/ -- Tootoo.com (http://www.tootoo.com/ ) today released its thoughts on how China’s oil refining industry, and more specifically Sinopec, Asia’s largest oil refining company, have been effected by the ever-increasing global oil prices.
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With recent surge in crude oil price, the price rise of refined oil products by China’s Development and Reform Commission cannot fully offset Asia’s largest refiner -- Sinopec’s huge loss. With the possibility of the cancelling of the rebate policy for the value-added oil tax and the rising costs of oil refining construction projects, the Chinese refining industry (http://www.tootoo.com/buy-refined_oil/ ) will face even greater pressure.
Last week, the international oil price exceeded the US$145 mark, and the oil industry believes it is only a matter of time before oil prices break through the US$150 mark. Tootoo.com’s network market analysts also believe that the global surge in oil prices has not yet ended, mainly due to market concerns and weakening petrochemical stocks. While the oil prices remain under control across China, this is potentially a negative position as China’s oil refining enterprises are now affected by the recent disclosure that the value-added tax rebates on crude oil and refined oil imports may soon be cancelled.
“The refining sector is still very far away from reducing losses although the loss rate has decreased after the recent adjustment of oil prices. The refinery will face even greater pressure if financial subsidies are cancelled," explained a senior member of Sinopec to a correspondent from Tootoo.com.
JPMorgan analyst Frank Li also said that if the average oil price is US$120 per barrel, Sinopec’s quarterly operating loss on refining business will be as high as RMB31 billion (about US$4.5 billion). "On the other hand, Sinopec’s combined quarterly profits from Petrochemical exploration, production, marketing and chemical operation is only about RMB24 billion." He believes that without additional financial assistance, or the increased refined oil retail price, the losses will continue. Additionally, Sinopec will have to import 1.5 million tons of diesel in the second quarter, which will cause around RMB31 billion in deficits, and thus exacerbating the company’s financial burden.
JP Morgan has downward revised Sinopec’s net profit anticipation to RMB18.9 billion, down 67%. This expectation is based on the crude oil price of US$110 per barrel in the remaining two quarters of this year, but hasn’t take the company’s Chemicals operating income decline into account. In order to enhance diesel production, Sinopec has reduced the number of oil and petrochemical products ( http://news.tootoo.com/Chemicals/Petroleum_Products/ ) in June and July.
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