Oil refinery is expected to increase after more losses**

In March, international oil prices continued to soar, and domestic refined oil prices remained “unmoved”, causing petrochemical companies to fall into different degrees of losses in a number of refineries and local private refineries. Among them, refineries that account for a relatively high level of refining operations have a higher level of losses.

The background of the heavy losses of the refinery, the average rate of change in the average price of crude oil in the three places significantly exceeded the red line of 4%, and other reasons, so that the expectation of the price increase of domestic gasoline and diesel after the “two sessions” also tended to be strong.

Refinery suffers more from deficits The management of a refinery in an eastern part of Sinopec told “First Financial Daily” that as of February this year, the company had already lost more than one billion yuan, and it is currently “extremely difficult”. About 70% of its crude oil comes from the Middle East. If the situation in the Middle East is getting tight, it will be more difficult for crude oil demand to be guaranteed. In addition, if the price of crude oil soars and domestic refined oil prices continue to remain in place, then the loss level of this refinery will increase.

As the third largest oil refining company in the world, Sinopec's crude oil processing capacity has reached about 230 million tons, accounting for 47% of the country's production capacity. The company's Zhenhai Refinery, Maoming Petrochemical, Gaoqiao Petrochemical, and Shanghai Petrochemical also exceeded the annual refining capacity of 10 million tons. The most realistic problems that Sinopec is now facing are: high crude oil prices and downstream refined oil prices are not adjusted.

After China introduced the refined oil pricing mechanism in 2009, the practice of oil prices following the irregular fluctuation of international crude oil prices has become a rule. Due to the current high crude oil prices, domestic gasoline and diesel prices have not been fully linked. As a mid-stream refinery company, it will appear very passive.

The monitoring information of several market institutions showed that the average price of crude oil in the Brent, Dubai, and Sinta regions that had been referenced by domestic oil prices had risen by more than 9% compared with February 7 when the NDRC adjusted prices.

Guo Bo Securities researcher Liu Bo once pointed out to reporters that after the reform of the refined oil pricing mechanism was initiated in 2009, the Chinese government determined that the price of gasoline and diesel was mainly based on the rise and fall of international crude oil prices and the “cost of refineries plus a small amount of profit”. Of course, the government will also determine the adjustment rate of gasoline and diesel prices based on the CPI of the year and the pressure of various industries. However, if the price of crude oil rises sharply in the short term and the domestic refined oil price is already approaching a high level, there will be pressure to increase the prices of gasoline and diesel. Therefore, in a certain period of time, the refinery may not be able to escape the fate of a loss.

A management team of Qilu Petrochemical admitted to the reporter that at present, all Sinopec's refineries are at a loss, and the biggest losses will be in some refineries, such as Takahashi Petrochemical, and Qilu Petrochemical. Sales of rubber products, especially rubber products, are fairly good, so the loss in the first two months was about 700 million yuan.

The chairman of CNPC, Jiang Jiemin, also said publicly that the Group’s oil refining business suffered losses of up to RMB 50 billion last year. Some people predict that Sinopec's 2011 refining sector losses may also have as much as tens of billions of dollars.

According to a report issued by Rehm Asia-Pacific Energy Consulting, the settlement price of China National Petroleum Daqing crude oil rose by RMB 260/tonne in February from the February level, and the related refineries changed from a low profit in February to a 114 yuan/ton loss in March; on the other hand, due to The rise in crude oil prices in Dubai further increased the loss of refineries processing imported crude oil to 453 yuan/ton.

In respect of ground refining, Zhongyu Information analyst Wang Jintao analyzed that the Shandong private refinery that processed Shengli crude oil also fell into a loss with a loss of around RMB 200/ton.

Is price adjustment or the only way to turn a loss?

A management team of Sinopec also stated that before 2009, Sinopec will receive some financial subsidies from the state, but now it is relatively unlikely that the state will give subsidies.

In the first half of 2007 and 2008, Sinopec had received a subsidy of about 50 billion yuan, while PetroChina also received subsidies of 15.7 billion in 2008.

Another management team of Sinopec also believes that the deep-seated reason for the loss of the refinery is not just because the cost of refineries, especially the cost of crude oil purchases, is higher than the domestic price of refined oil, but in 2009 the price of gasoline and diesel was At the beginning of the mechanism, there was no complete connection with international crude oil prices. At that time, there was a price gap of US$10/barrel or even higher.

He said that in 2010, the international crude oil price gradually increased, while the number of domestic gasoline and diesel adjustments are also more, so most of the refineries do not make money in 1 month, but the remaining 11 months are basically making money. In 2011, the domestic gasoline and diesel price adjustment rate was significantly reduced.

"At the price adjustment on February 8, 2012, China's gasoline and diesel prices were converted to crude oil at a price of US$92 per barrel. At that time, the international crude oil price had risen to over US$100 per barrel."

In order to make up for the loss of the refinery, Sinopec has adjusted the ex-factory prices of gasoline and diesel in early February of this year (of which gasoline and diesel are priced at RMB 100/ton and RMB 50/ton respectively) earlier than the country’s February 8th. The retail price of diesel was increased by 300 yuan/ton. This will allow the refinery to increase its revenue. In addition, in January 2012, Sinopec’s affiliated refineries continued to adopt the “gasoline and diesel over-production incentives” policy last year, producing one ton of gasoline or diesel. Sinopec Group will award 440 yuan and 710 yuan to refineries.

A number of Sinopec sources stated that it is estimated that after the “two sessions”, China may continue to adjust the retail price of gasoline and diesel, because from the pricing mechanism, the current crude oil prices have risen and have already reached the price adjustment window for refined oil products in China.

As of March 13th, the NYSE’s April light sweet crude oil futures WTI closing price was closed at 106.34 US dollars/barrel; London ICE exchange Brent crude oil futures settled at 125.34 US dollars/barrel in April, down 0.64 USD/barrel. On March 12, crude oil in the three places moved for an average weighted price of 122.603 US dollars per barrel for 22 consecutive days, and the average price change rate of crude oil in the three places was 9.56%, which was a lot higher than the "4%" red line of price adjustment.

Liu Feng, an analyst at Zhuochuang Information Technology, pointed out that in addition to the coking unit being a profitable refinery in Shandong, all other single sets of refinery equipment are at a loss. "If the NDRC raises the price of gasoline and diesel by 400 yuan/ton, it will reverse the loss."

Wang Jintao also said that due to the large increase in international crude oil, it is expected that the price of gasoline and diesel in this round will increase by 400 to 500 yuan per ton; by that time, major refineries are expected to turn losses into profits.