Sinopec's profit for the first half of this year increased 19.3% despite Iran War and falling demand

Sinopec, China, reported a 19.3% increase in net profits for the first half of 2026. This was despite the Middle East conflict, and the falling demand for fuel at home. However, it said that they had to write off their inventories by 16.3 billion yuan.

Sinopec announced in a filing on the Shanghai Stock Exchange that the net profit for the period January-June was 25.63 billion Yuan ($3.81billion) according to Chinese accounting standards. This compares with 21.48 billion Yuan a year ago.

In a separate filing the company stated that it had set aside provisions of 16 billion yuan for the impairment of assets as a result?of the volatility in oil and fuel price in the first half of this year.

Sinopec is the world's largest refiner and relies on Middle East crude oil for about half of its needs. This makes it vulnerable to a worst-ever supply crisis as the Strait of Hormuz, through which it imports large quantities of oil, has been largely closed since march.

According to the filing, the company also processed 5.6% fewer barrels of crude oil from January to June than the same period last year, totaling 113.31 metric tons or?4.57 billion barrels per day.

The company's refining margin increased by 44.1% in the first half of 2026, from 139 yuan to 453 per metric tonne. This was a surprise given that domestic fuel prices rose at a slower pace than crude oil costs.

The filing revealed that its refining division reported a 381,5% increase in operating profit. This was achieved by "expanding the crude oil sources outside of the Middle East", closely managing the timings of purchases to match market conditions and optimising the product mix according to product profitability.

China has cut its oil imports dramatically since the conflict began in March. This has kept prices down and allowed other countries to benefit. Sinopec's results are all the more shocking given that it is so exposed to the Strait. Beijing also forced refiners like Sinopec to absorb oil price shocks by limiting the ability of the refiner to pass on higher prices to consumers.

The conflict in the Middle East caused "sharp fluctuations in international crude oil and a substantial rise in imported crude acquisition costs", while domestic refined products and chemicals markets were weak, stated the management in the filing.

The company claimed that it had "closely monitored changing circumstances, dynamically adapted production and operating arrangements and effectively responded to unexpected shocks and challenges across multiple fronts."

It said that the chemicals segment was still losing money, with an operating loss exceeding 200 million yuan. However, losses were reduced by 4 billion yuan.

The company was faced with overcapacity in the industry and increased competition from the private sectors.

Sinopec estimates crude throughput from July to December at 113 millions metric tons. This is roughly the same as the amount processed during the first half. $1 = 6.7210 Chinese yuan renminbi (Reporting and editing by Raju Gopikrishnan; Xiuhao Chen, Lewis Jackson and Chen Aizhu from Beijing and Singapore).

(source: Reuters)