Hong Kong Hefty refining losses continued to weigh on profits at Chinese state oil giants Petro-China and Sinopec Corp in the first three months of the year, with the latter posting a worse than expected 35 per cent drop in earnings.
But the worst may be over because the Chin-ese government raised gasoline and diesel prices twice in the first quarter, and crude prices may have peaked for this year, some analysts say.
"This should mark the bottom of their earnings cycle," said Gordon Kwan, head of Energy Research at Mirae Asset Securities. "They came too late to save the first quarter but they should boost the second quarter revenue," Kwan said.
Chinese refiners cannot fully pass on higher crude costs to consumers because the government controls oil product prices to curb inflation.
Sinopec said yesterday that its net income fell to 13.41 billion yuan (Dh7.82 billion) in the first three months from 20.6 billion a year earlier. That missed the average forecast of 16.69 billion yuan given by seven analysts polled by Reuters.
Its refining division, the largest in Asia, lost 9.2 billion yuan in the first quarter. Credit Suisse expects the loss to widen to 56 billion yuan for the full year, assuming Brent crude prices average $125 per barrel this year, compared with a loss of 37.6 billion yuan in 2011.
PetroChina, China's biggest oil and gas producer, posted a 5.8 per cent rise in first-quarter profit, beating forecasts, as strong oil and natural gas production gains offset losses at its refining and chemicals businesses. Its net income was 39.15 billion yuan in the first quarter, compared with 37 billion a year earlier.
