China Petroleum & Chemical Corp, Asia's biggest refiner, posted surprisingly better third quarter net profit after two increases in state-controlled retail fuel prices and improved petrochemical sales helped margins.

 

The company, known as Sinopec, said in a statement yesterday that third-quarter net income fell 9.4 percent to 18.3 billion yuan (US$2.93 billion) from 20.2 billion yuan a year ago. That beat the 14.19 billion-yuan median estimate of nine analysts surveyed by Bloomberg News.

 

China controls retail fuel prices to contain inflation. Oil prices were raised twice in August and September after inflation fell to 1.9 percent in September from as high as 4.5 percent in January. Sinopec, forced to sell fuel below cost under the pricing system, posted its lowest half-yearly profit since 2008 in the six months ended June 30.

 

"Sinopec should be very close to break even in the refining sector this quarter, and petrochemical margins should also have seen apparent improvement as demand rebounds," said Shi Yan, a Shanghai-based energy analyst at UOB-Kay Hian Ltd. "The fourth quarter should provide Sinopec a chance to see the refining sector return to profit, especially if the government continues to push for a more flexible retail fuel pricing mechanism."

 

Sinopec shares fell 1.8 percent to HK$8.02 (US$1.04) last Friday. The stock has gained 6.9 percent in the past year, compared with a 13 percent increase in the Hang Seng index.

 

"Operations in the third quarter improved thanks to our active adjustments in production and sales," the state-owned refiner said in its statement to the Shanghai stock exchange. "Prices of chemical products also rebounded in the third quarter after a big decline in the second quarter."

 

Crude output rose 2.3 percent in the first nine months to 245 million barrels and natural gas output gained 15 percent to 438 billion cubic feet (12.4 billion cubic meters), according to the statement. 

 

Realized crude prices rose 2.5 percent to US$100.69 a barrel, while realized natural gas prices rose 5.5 percent to US$5.77 per thousand cubic feet, it said. 

 

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