the global oil market volatility, "three barrels of oil" why only Sinopec net profit fell?

's "three barrels of oil" have been disclosed one after another. PetroChina (601857.SH/ 00857.HK) has made steady progress, CNOOC (00883.HK/ 600938.SH) has increased by nearly 20% year-on-year, while Sinopec (600028.SH/ 00386.HK) has fallen, especially its net profit fell by more than 50% in the third quarter.

According to the latest financial report, in the first three quarters, PetroChina's net profit attributable to its parent company was 132.522 billion yuan, an increase of 0.7 percent over the same period last year, while CNOOC's net profit attributable to its parent company was 116.659 billion yuan, an increase of 19.5 percent over the same period last year, both hitting record highs in the same period. Sinopec's net profit was 45.11 billion yuan, down 16.6 percent year-on-year.

Sinopec's net profit grew 2.6 per cent year-on-year in the first half of this year, net profit attributable to its parent in the third quarter was 8.03 billion billion yuan, down 55.2 per cent from a year earlier. CNOOC's third-quarter net profit increased 9% year-on-year to 36.928 billion yuan.

for the "three barrels of oil" completely different financial performance, Jiecheng Energy chief analyst Yan Jiantao told the interface news, their upstream and downstream structure is different, asset structure is also different.

CNOOC is the largest offshore oil and gas producer in China. Its business segment focuses on exploration and production, and although it is involved in some refining and sales, it is a pure upstream oil and gas company as a whole.

PetroChina is the largest oil and gas producer and supplier in China, its business involves oil and gas and new energy, refining and chemical industry and new materials, sales, etc., but its upstream oil and gas and new energy business accounts for more than 30% of its revenue, accounting for a relatively large proportion. this part of the business has achieved net profit growth this year.

Sinopec is the largest supplier of refined oil and petrochemical products in China, and its business sectors also include exploration and production, refining, marketing and distribution, and chemicals. In the first three quarters of revenue, upstream exploration and development accounted for only 5.69 percent, refining in the middle and lower reaches accounted for 5.23 percent, marketing and distribution accounted for the largest, 55.21 percent, and chemicals accounted for 13.48 percent.

this determines that Sinopec's performance depends more on upstream costs, and the performance of the other two companies is more directly related to oil and gas production and oil prices.

Sinopec explained the sharp decline in third-quarter performance compared with the same period last year, oil prices showed a unilateral upward trend in the third quarter of last year, while oil prices fell rapidly in the third quarter of this year, resulting in a sharp decrease in inventory income compared with the same period last year, as well as the impact of the decline in gross profit of petroleum and petrochemical products.

Yan Jiantao said Sinopec needs to purchase large quantities of crude oil and raw materials for its refineries. In this process, due to the procurement and refining to the production and sales of refined oil and chemical products, there is a certain cycle, usually about two to three months, so there will be a large amount of inventory caused by inventory impairment problems, the scale can generally reach several billion yuan.

At the third-quarter performance call held on October 29, Sinopec management also pointed out that the decline in oil prices in the third quarter had a relatively large impact on the company's inventory. Among them, the refining sector's inventory was reduced by 4.3 billion yuan and the sales sector's inventory was reduced by 1.36 billion yuan.

Inventory impairment refers to the loss of oil enterprises due to the destruction of inventory, sales price below cost and other reasons.

"It is normal for companies to incur inventory impairments, but excessive losses require vigilance and may be related to factors such as declining industry sentiment and corporate business strategy errors. The fall in global oil prices has increased the risk of inventory impairment for refiners, and the corresponding increase in storage and transportation costs has also pushed up the procurement costs associated with imported crude oil." Yan Jiantao said.

Interface News noted that in the 2024 semi-annual report, Sinopec mentioned that looking forward to the second half of this year, China's economy is expected to continue to pick up. Domestic demand for natural gas and chemical products is expected to grow, and demand for refined oil products remains basically stable. Taking into account the impact of geopolitics, global supply and demand and inventory changes, international crude oil prices are expected to remain broadly volatile.

In the first three quarters of this year, international crude oil prices rose first and then fell, and the overall remained mid-to-high volatility. The average in stock price of Brent crude oil was 82.79 US dollars per barrel, a year-on-year increase of 0.9 percent; the average in stock price of West Texas Intermediate crude oil in the United States was 77.71 US dollars per barrel, a year-on-year increase of 0.5 percent.

Among them, the average price of Brent crude oil in stock in the third quarter was $80.2/barrel, down 7.6 per cent year-on-year and 5.6 per cent month-on-month, respectively.

Yan Jiantao said that despite market fluctuations, the price of Sinopec's upstream sector has not fallen, but has risen. In the first three quarters, the realized price of crude oil was 76.6 US dollars per barrel, up 1.2 per cent from the same period last year, while the realized price of natural gas was 1.88 yuan per cubic meter, up 6.8 per cent from the same period last year.

In other words, Sinopec's performance is mainly dragged down by the middle and lower reaches of refining, chemical and other sectors.

Yan Jiantao believes that Sinopec's refining business reflects the current challenges facing the entire industry, especially the decline in diesel production by more than 10% and the decline in chemical sector production by 6%, which is related to the economic slowdown and energy transformation.

In addition, summer is usually the peak season for gasoline demand, but due to factors such as the rapid growth of electric vehicles in recent years, Sinopec's refined oil sales growth in the first three quarters is not ideal.

financial report shows that in the first three quarters, Sinopec's total distribution of refined oil was 0.182 billion tons, a year-on-year increase of 0.6; the total domestic distribution of refined oil was 0.138 billion tons, a year-on-year decrease of 3.2.

Yan Jiantao pointed out that in the chemical sector, although processing costs have basically maintained a downward trend, due to the impact of the external economic environment, the operating loss of Sinopec's chemical sector has also expanded from 3.782 billion yuan last year to 5.575 billion yuan in the first three quarters, showing the economy. The environment has a significant impact on this sector.

in fact, PetroChina also mentioned the problem of slowing demand in the domestic refined oil market in its financial report. However, its natural gas market demand maintained rapid growth, coupled with the development of new energy and new materials and other emerging industries, the net profit in the first three quarters achieved a slight increase.

the performance of CNOOC rose this time, it was mainly due to the sharp increase in net production and the control of the main cost of barrel oil.

According to the financial report, in the first three quarters of this year, CNOOC's net production rose 8.5 percent year-on-year to 542.1 million barrels of oil equivalent.

, the company's domestic net production reached 369.2 million barrels of oil equivalent, up 6.8 percent year-on-year, mainly due to the contribution of oil and gas fields such as Bozhong 19-6 and Enping 20-4. Overseas net production reached 172.9 million barrels of oil equivalent, up 12.2 percent year-on-year, mainly due to the increase in production brought about by the commissioning of the Payara project in Guyana.

In addition, the main cost of barrel oil in the first three quarters was US $28.14, basically the same year on year.

Yan Jiantao said that CNOOC's barrel oil costs have been maintained at a low level, and the focus can be on the growth of its net output, which is mainly related to its asset structure, and more than 70% of its asset structure is crude oil production.