Sinopec flags chemicals spending cut as profit pressure mounts

Published Mon, Mar 23, 2026 · 11:14 AM

SINOPEC has set a flexible budget target for this year, flagging a potential capital expenditure cut of as much as 20 per cent, after it reported a steeper-than-expected decline in profit for last year.

China’s biggest refiner wants to retain room to adjust spending depending on market conditions, it said in an exchange filing on Sunday (Mar 22), as it braces for rising headwinds from global volatility and weak demand. Most of the reduction is set to come in chemicals.

The oil major set this year’s spending target at 131.6 billion yuan (S$25 billion) to 148.6 billion yuan. That’s down from 164.3 billion yuan in 2025.

Sinopec, officially known as China Petroleum & Chemical, reported a 34 per cent drop in net income for 2025. The slump reflected a decline in consumption of transport fuels due to continuing electrification of the vehicle fleet, as well as a wave of new petrochemical plants leading to structural oversupply.

The company will also need to deal with the fallout from the Middle East war, which has sent oil prices soaring and led to China banning fuel exports. Sinopec’s refining margins will likely come under pressure in the second quarter, due to the spike in crude prices and freight costs from the blockage of the Strait of Hormuz, Citigroup said in a note by analysts, including Oscar Yee.

Despite mounting pressure from rising feedstock costs and tepid demand, Sinopec said that it plans to keep throughput and oil production broadly unchanged from the previous year. It will cut its sales target by 4 per cent, while continuing to expand natural gas and ethylene production, but at a slower pace, it said in the filing.

China’s massive oil reserves have given the world’s largest oil importer some breathing space to deal with the Middle East war. Beijing has built up an estimated 1.4 billion barrels of stockpiles that can be tapped if Hormuz remains mainly shut.

Sinopec has trimmed run rates by about 10 per cent from its original plan for March, according to sources familiar with the matter, a reduction of around 500,000 barrels a day. A tighter global supply of oil, if the war persists, could complicate the refiner’s efforts to shift production more towards petrochemicals. BLOOMBERG