Despite geopolitical tensions, China's three major state-owned oil companies—China National Petroleum Corporation (CNPC), China Petroleum & Chemical Corporation (Sinopec), and China National Offshore Oil Corporation (CNOOC)—have reported robust profit growth for the first quarter of 2026, demonstrating effective adaptation to a complex global oil and gas market. Combined, they achieved a net profit attributable to parent company shareholders exceeding 104.4 billion yuan, marking a strong start to the year.
The upstream sector benefited significantly from geopolitical risk premiums. Conflicts from the US-Venezuela tensions at the year's start to the Middle East conflict in late February heightened global supply uncertainty. "The 'Big Three' have firmly shouldered the responsibility of ensuring supply while continuously advancing reserve increases and production growth," noted an energy economics expert. Concurrently, these conflicts pushed oil prices higher. The average spot price for Brent crude in Q1 2026 was $80.6 per barrel, a 6.5% year-on-year increase. This higher pricing environment directly boosted upstream profitability. All three companies reported improved performance in their upstream operations, achieving simultaneous growth in output and profits.
For instance, CNOOC's net oil and gas production reached 205.1 million barrels of oil equivalent, up 8.6% year-on-year. Domestic production contributed 140.0 million barrels, a 7.0% increase, indicating steady capacity release. Supported by record-high quarterly production, CNOOC's Q1 revenue rose 8.6% to 116.079 billion yuan, with net profit attributable to parent company shareholders growing 7.1% to 39.144 billion yuan, showcasing strong profitability and growth momentum.
Alongside production growth, the companies intensified domestic exploration and development investments. Sinopec allocated an additional 15.6 billion yuan to its upstream sector to strengthen resource reserves. CNOOC's capital expenditure increased by 19.1%, focusing on exploration in core production areas. CNPC steadily increased domestic output, reducing reliance on Middle Eastern crude. These collective efforts contribute to enhancing China's energy self-sufficiency and safeguarding energy security.
The midstream refining and chemical sector showed divergent trends as high oil prices filtered through. "On one hand, high prices brought inventory revaluation gains, supporting short-term profits. On the other, rising crude procurement costs squeezed processing margins," the expert explained.
The refining segment emerged as a primary beneficiary of high oil prices in Q1, with leading players posting strong results due to inventory gains. Sinopec, for example, processed 62.02 million tons of crude oil and produced 38.06 million tons of refined oil products, a 2.3% increase. Its refining segment's EBIT reached a record 18.936 billion yuan for the period.
However, the chemical segment faced intensified operational divergence. CNPC's chemical business demonstrated resilience, with commodity chemical output reaching 10.779 million tons, up 8.2%. Ethylene production surged 21.4% to 2.755 million tons, and new material output jumped 53.5% to 1.228 million tons, indicating a rising share of high-value-added products. In contrast, Sinopec's chemical segment encountered significant pressure. Despite producing 3.553 million tons of ethylene and selling 20.06 million tons of chemical products, its overall profitability was weak, with a segment gross margin of only 0.4% and an EBIT loss of 1.334 billion yuan. In response, Sinopec is implementing measures such as delaying inefficient capacity projects, upgrading existing facilities, and accelerating development of high-end new materials like POE to increase its high-value product mix and offset profitability pressures in traditional chemicals.
The impact of high oil prices on the downstream sector is more complex. "High prices directly benefit upstream exploration and production, but their effect downstream is multifaceted," commented an energy economics research director. The International Energy Agency's April market report noted that high oil prices, combined with factors like reduced flights in some regions and LPG supply disruptions, are jointly dampening the recovery of end-consumption demand.
Domestically, sales divisions of oil companies face clear pressure due to economic restructuring, the adoption of alternative energy, and uneven recovery in consumption scenarios. In this context, companies like CNPC are strengthening refined oil resource allocation, marketing, inventory management, and implementing targeted regional and product-specific sales strategies. This has effectively stabilized and slightly increased domestic refined oil sales volume and market share, ensuring smooth operation of the crude oil industry chain. They are also actively expanding into areas like vehicle LNG refueling, battery swapping/charging, and non-fuel businesses.
These initiatives have yielded solid results. CNPC's Q1 sales of refined oil products reached 38.533 million tons, a 4.8% increase, while natural gas sales volume grew 6.9% to 93.891 billion cubic meters. Its sales business achieved an operating profit of 6.47 billion yuan, maintaining an overall stable operational posture.
Looking ahead, as pillars of China's oil and gas industry, the "Big Three" are leveraging flexible strategies and a comprehensive global footprint to navigate market changes. Sinopec's Board Secretary stated the company closely monitors global market dynamics, strengthens analysis, prepares multiple contingency plans in advance, and adjusts strategies flexibly to meet various market challenges. Sinopec has established specialized trading teams in multiple global regions, utilizing its global resource allocation capability to ensure stable domestic feedstock supply.
He further indicated, "The company will continue optimizing crude procurement strategies, increasing purchases from non-Middle Eastern sources, while strengthening its own crude supply capability. It will actively seek domestic resource quotas, working through multiple channels and dimensions to mitigate the impact of geopolitical risks on the supply chain and achieve diversified, stable feedstock supply."
International oil prices remain a key factor influencing the companies' operations. Industry experts suggest that in the short term, with the easing of Middle East tensions, the geopolitical risk premium has largely subsided, and oil prices lack a core driver for sustained sharp increases. In the medium to long term, factors such as a potential easing of OPEC+ production cuts, accelerated global energy transition, and constrained demand growth are expected to gradually loosen the supply-demand balance. International oil prices are likely to maintain a high level with a fluctuating downward trend.
Under this outlook, once inventory revaluation gains are realized, the refining and chemical segments of the "Big Three" may face pressure. A commodities information provider's model shows that in April, the average operating rate of major refineries was 70.69%, down 6.04 percentage points month-on-month. With lingering Middle East impacts, daily processing volumes at some major refineries continued to decline sequentially, and the average operating rate is expected to keep falling.
Sinopec's Board Secretary noted that a prolonged Middle East conflict would pose significant challenges to the company's refining and chemical business. Industry experts suggest that in the coming period, to stabilize the refined oil market, refineries may adopt a "reduce chemicals, increase oil" strategy.
Uncertainty in the global oil and gas market is expected to persist. Anchored in their core mission of ensuring energy supply, how the "Big Three" will drive their own high-quality development within the complex global energy landscape warrants continued industry attention.
Comments