The third-quarter performance of China's three State oil giants improved markedly, mainly due to higher global oil prices, and favorable conditions are set to continue in the fourth quarter, experts said Tuesday.
PetroChina, the listed arm of China National Petroleum Corp, China's largest oil and gas producer and supplier, said in its third-quarter financial statement on Monday that its net profit surged thanks to higher crude oil prices and cost controls.
Net profit increased 291 percent year-on-year to 4.69 billion yuan (6 million), as the company cut debt and interest expenses. Revenue rose 17 percent to 481.8 billion yuan, PetroChina said in a filing sent to the stock exchange in Hong Kong.
For the first nine months of 2017, net profit was up more than ninefold year-on-year to 17.36 billion yuan.
"The oil price hike reflected the emerging global economic recovery, and China remains a major world energy consumer," Dong Xiucheng, director of the China Oil & Gas Center with the China University of Petroleum, told the Global Times on Tuesday.
Oil demand in China, the world's largest importer, remains huge, hitting a January-September average of 8.5 million barrels per day, according to a Reuters report in early October.
The current depreciation of the U.S. dollar reflects the increase of oil prices, because the dollar and crude prices move in an inverse relationship, Dong noted.
An agreement between the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers to cut oil production has also driven price hikes, he said.
Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, pointed out that high oil prices mean the most for the earnings of companies at the upstream, namely PetroChina.
PetroChina's crude oil output fell to 660 million barrels in the first three quarters of the year, down 5 percent year-on-year. Natural gas sales were up 4.5 percent year-on-year to 71.9 billion cubic meters.
The company incurred net losses from selling imported gas and liquefied natural gas (LNG), because it pays fixed prices under long-term contracts. Those losses hit 17 billion yuan in the nine months through September, it noted.
"The LNG price was very low during the July-September period, although it has risen at least 10 percent since mid-October ahead of the start of the winter heating season in northern China," Lin said.
Thus, PetroChina's loss in the gas segment will be alleviated in the fourth quarter, he noted.
China Petroleum and Chemical Corp (Sinopec), the world's second -largest oil refiner by capacity and a major producer of oil and gas, also announced results for the third quarter on Monday. Net profit attributable to equity shareholders was up 14 percent year-on-year to 11.3 billion yuan as earnings from refining offset upstream and impairment losses.
For the first nine months of the year, that figure jumped by 32 per cent year-on-year to 38.4 billion yuan, according to the filing the oil refiner sent to the Hong Kong exchange.
In that period, domestic use of refined oil products rose 6.6 percent year-on-year, with gasoline and kerosene consumption maintaining strong growth momentum. Domestic consumption of natural gas rose by 15.9 percent year-on-year, said the financial report.
"Sinopec's oil businesses involve the upstream, middle and downstream [segments], so oil price fluctuations will not have a strong and obvious impact on its earnings, although it is sure to benefit from the overall trend," Lin noted.
China National Offshore Oil Corp (CNOOC), the nation's biggest offshore explorer, announced its third-quarter report on October 25, showing that it achieved a 17 percent year-on-year increase in oil and gas sales as rising crude prices countered sliding output.
Yet the explorer did not disclose its net profit in the report.
Experts forecast the three companies' performances will maintain an upward trend in the fourth quarter as oil prices are likely to remain stable or rise.
PetroChina's H-share price was unchanged on Tuesday. The H shares of Sinopec and CNOOC advanced by 0.17 and 1.34 percent, respectively. H shares are traded in Hong Kong.