Oil industry profits down in H1

China Petroleum & Chemical Corporation (Sinopec), one of China's largest oil producers by sales revenue, posted a huge drop in its first-half profits as the domestic petrochemical industry reels under the weight of crimped demand and increasing prices for imported crude oil, trends which experts say will linger for the industry into the start of the second half.

According to the earnings report it issued late Sunday, Sinopec's profits stood at 23.7 billion yuan ($3.73 billion) in the first six months of 2012, down 41 percent from the same period last year. Meanwhile, its major peers in the domestic petrochemical industry, China National Offshore Oil Corporation (CNOOC) and China National Petroleum Corp (CNPC), also saw their profits skid 19 percent and 6 percent year-on-year respectively during the same period.

The decline in profits witnessed among these three domestic oil giants comes as their customers in the downstream market pared down their appetite for petrochemical products amid worsening economic conditions at home and abroad, Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times.

Sinopec and CNPC also attributed their earnings slumps to losses in their refined oil businesses as a result of government caps on refined oil prices and mounting crude prices in the international market. Specifically, the refining units of Sinopec and CNPC suffered losses of 18.5 billion yuan and 23.3 billion yuan respectively in the first half.

Giants are not the only industry players that have watched their earnings tumble recently. The industry's profits as a whole fell 14.4 percent year-on-year during the first five months of 2012, well above the average 2.4 percent drop recorded across all of China's large industrial enterprises during the same time period, according to a report from the China Petroleum and Chemical Industry Federation issued on August 6.

The situation may improve in the second half of this year though, when many experts are predicting China's slowing economy will again pick up steam, Lin said.