By Charles Kennedy of OilPrice.com

The largest Chinese and Asian refiner Sinopec reported on Thursday a 36% decline in its first-half profit on the back of lower oil prices and refining margins and weakening domestic fuel demand.

China Petroleum & Chemical Corporation, or Sinopec, as it is more commonly known, booked a profit attributable to shareholders of $3.3 billion (23.75 billion Chinese yuan) for the period January to June 2025, down by 35.9% from the same period last year.

“Dragged by various factors such as the declining international crude oil prices combined with weak chemical margins, the Company’s profitability for the first half significantly decreased year on year,” Sinopec’s chairman Hou Qijun said in a statement accompanying the first-half results.

Sinopec estimates that while China’s natural gas demand rose by 2.1% year-over-year in January to June, domestic consumption of refined petroleum products slumped by 3.6% from a year earlier, “mainly affected by alternative energy.”

China’s gasoline consumption fell by 4.6% and diesel demand decreased by 4.3%, while kerosene consumption rose by 4.2%, Sinopec said.

The domestic demand for major chemical products grew rapidly, with ethylene equivalent consumption up by 10.1% year on year, the Chinese state giant added.

Looking forward, Sinopec expects China’s domestic demand for natural gas and chemical products to increase in the second half of the year, while demand for refined oil products “will be impacted by alternative energy.”

In the refining business, the company vowed to diversify its crude oil resources, dynamically optimize the procurement scale and pace, and reduce procurement costs. That’s likely a hint that it would boost the supply of domestic and cheap foreign crude to process at refineries amid weak margins and weak domestic demand for transportation fuels.

Over the past year, consumption of the road transportation fuels – gasoline and diesel – has been trailing the levels from just two years ago, when China was emerging from nearly three years of Covid-related lockdowns. That’s not only because of the pent-up demand back in 2023. A large part of the lower gasoline and diesel demand is due to the soaring sales of electric passenger cars and trucks and LNG-fueled heavy-duty vehicles.