Sinopec profit rises on refining margins

Top Asian oil refiner Sinopec Corp. posted a 36 percent surge in quarterly earnings as lower oil prices helped its refining arm turn around, but the firm warned that the now loftier cost of crude may pressure its second half.

Overall, Sinopec's first-half net profit leapt nearly two-thirds, its best six-month performance since 2003 with oil prices nearly 4 percent lower, on average.

Crude prices hit a 19-month nadir below 50 U.S. dollars a barrel in January before recovering to a 10-month high of above 70 dollars a barrel at the end of June. Depressed prices translate into a windfall for refiners.

But analysts say the rebound in crude, which peaked at a record 78.77 dollars at the beginning of this month, squeezed Sinopec's refining margins back into negative territory again in the third quarter, after moving into the black in the fourth quarter of last year.

The Hong Kong and Shanghai-listed firm has to contend with government caps on product prices and a national obligation to supply the fast-growing domestic market with fuel. Executives have signaled that the government is unlikely to raise retail fuel prices in the near term.

A government decree this month urged refineries to boost output and warned against unauthorized wholesale price rises, showing concern about fuel shortages and inflation.

Sinopec, which vies with PetroChina Co. and CNOOC Ltd. to supply the world's second-largest oil market, posted a second-quarter net profit of 16.79 billion yuan (2.21 billion dollars)

That compared with a marginally restated 12.32 billion yuan and beat a forecast for 14.7 billion yuan, according to four analysts.