Top Asian refiner Sinopec Corp. yesterday said it posted a 39.1-percent drop in third-quarter earnings as higher crude prices hurt its refining business, but analysts were upbeat on its outlook with crude rates falling.

Beijing-based Sinopec earned 8.17 billion yuan (US$1.2 billion), against 13.4 billion yuan a year earlier, under international accounting rules, the company reported.

The benchmark New York crude futures averaged 57 percent higher in the third quarter from a year earlier, eating into Sinopec's margins despite a government move to raise gasoline and diesel prices by up to 18 percent in June.

Still, Sinopec's third-quarter profit is about four times that of the second quarter as refining losses narrowed, and falling crude prices are making Sinopec increasingly attractive.

New York crude have more than halved to about US$65 a barrel recently from July's record high amid concern global economic slowdown would cut demand.

Sinopec said it got 11.7 billion yuan in state subsidies due to its refining losses in the third quarter.

"Narrowing refining loss means Sinopec could have a brighter fourth quarter," said Qiu Xiaofeng, an analyst at China Merchants Securities. But he also pointed out China may again lower fuel prices if crude could stay below US$80 over a longer period.

Sinopec's January-September crude output rose 2.1 percent to 31.33 million tons, and the processing volume swelled 7.3 percent to 128.77 million tons. One ton of crude equals to about 7.3 barrels.

Its capital expenditure in the first nine months was 58.8 billion yuan. Sinopec in August said it will cut capital spending by 8.2 billion yuan to ease cash-flow constraints and operations due to the refining loss.

Rival PetroChina Co., the nation's top crude oil producer which has a smaller refining exposure than Sinopec, yesterday said earnings rose 29.9 percent to 39.9 billion yuan in the past quarter on higher crude prices and output. In the first nine months, PetroChina produced 653 million barrels of crude and 1.37 trillion cubic feet of natural gas, up 2.8 percent and 16.3 percent respectively.

(Shanghai Daily October 30, 2008)