New Fuel Pricing System Drives Strong H1 for Sinopec

飞雪寒冰

The strong first-half results of China Petroleum and Chemical Corp.(SSE:600028, HKEX:00386, NYSE:SNP) were driven largely by its profitable refining business after China implemented a new fuel pricing system, Qiu Xiaofeng, an oil analyst with China Merchants Securities, told Caijing on August 24.

Global crude oil prices and domestic oil product prices both influence Sinopec's performance, Qiu said. The new pricing system relieved Sinopec, Asia's top refiner, from domestic fuel price caps and helped the company's refining business become profitable for the first time for four years, Qiu said.

The new mechanism, launched at the beginning of the year, helped the refining business record 19.9 billion yuan in first-half operating profit, against a loss of 46.5 billion yuan last year, according to Qiu.

飞雪寒冰

The National Development and Reform Commission introduced the market-based pricing system to bring domestic oil prices in line with the global market.

The NDRC increased tariffs five times in the first half, raising oil product prices by as much as 25 percent, in line with its policy of adjusting prices if world crude prices moved more than 4 percent over 22 consecutive working days.

In its first-half report, Sinopec said it expected results for the first three quarters to be more than 50 percent higher than last year's as domestic oil demand is likely to pick up in the second half.

Guangdong-based Guosen Securities Co. Ltd. has a "buy" recommendation on the stock.

On August 24, Sinopec closed up 2.21 percent at 13.39 yuan in Shanghai, while its Hong Kong-traded shares closed up 0.58 percent at HK$6.97.