China's Sinopec reported an unexpected 19.3% year-on-year increase in net profit for the first half of 2026, despite a litany of issues including the Middle East conflict and falling demand for fuel domestically, but said it had to write down its inventories by 16 billion yuan.
Net profit over the January-June period stood at 25.63 billion yuan ($3.81 billion) under Chinese accounting standards, versus the 21.48 billion yuan a year earlier, Sinopec said in a filing at the Shanghai stock exchange on Sunday.
In a separate filing, the company said it set aside provisions for asset impairment of 16 billion yuan as a result of the volatility in oil and fuel prices in the first six months of this year.
Sinopec, the world's biggest refiner, relies on the Middle East for half of its crude oil needs, making it vulnerable to the worst supply crisis in history as the Strait of Hormuz - through which it usually imports large quantities of oil - has remained largely closed since March.
It also processed 5.6% less crude oil between January and June versus the same year-ago period, at 113.31 million metric tons, or 4.57 million barrels per day (bpd), according to the filing.
The company said its refining margin was up 44.1% on the year in the first half of 2026 - up 139 yuan per metric ton to 453 yuan per metric ton - a surprising jump given domestic fuel price hikes lagged the surges in crude oil cost.
Its refining segment reported a 381.5% growth in operating profit by "broadening crude oil sourcing outside the Middle East, closely managing the timing of purchases in line with market conditions, and optimizing its product mix based on product profitability," the filing showed, according to Reuters.
China has drastically cut oil imports since the war began in March, freeing up barrels for others and keeping a lid on global prices. Sinopec's result is all the more surprising given how exposed it was to the Strait and the way in which Beijing has forced the refiner, and others like it, to absorb the oil price shock by limiting their ability to pass higher oil prices through to fuel consumers
Conflict in the Middle East caused "sharp volatility in international crude oil prices and a substantial increase in imported crude procurement costs", while the domestic refined product and chemicals markets remained weak, the management stated in the filing.
But the company said it "closely monitored changing conditions, dynamically adjusted production and operating arrangements, and effectively responded to unexpected shocks and challenges on multiple fronts."
The chemicals segment remained loss-making, recording an operating loss of over 200 million yuan, but losses narrowed sharply by around 4 billion yuan, it said.
Output of ethylene, a key building block for petrochemicals, sank 15.5% on the year to 6.4 million tons in the first half, as the company faced industry over-capacity and competition from the private sector.
Sinopec projects crude throughput for July–December at 113 million metric tons, roughly flat versus the amount processed in the first half.
