Experts say the long-term downward trend in refined product demand is inevitable, and the replacement of traditional fuels by new energy is irreversible. Since the start of this year, amid the impact of geopolitical conflicts in the Middle East, upstream international oil prices have remained elevated, while downstream refined product supply has stayed tight. Leading petroleum and petrochemical enterprises represented by PetroChina and Sinopec have seen rising profits. In the first three quarters of this year, the "three oil giants" collectively achieved growth in both revenue and net profit, with combined net profit attributable to parent companies reaching nearly 313.88 billion yuan, surpassing the total net profit for all of 2025. Among them, PetroChina led in profitability, with net profit attributable to parent companies of nearly 155.8 billion yuan in the first three quarters, a record high. CNOOC followed with 119.1 billion yuan. Sinopec posted net profit attributable to parent companies of nearly 40.2 billion yuan in the first three quarters, up 25.3% year on year, the highest growth rate. The upstream oil and gas exploration and development business forms the foundation of the "three oil giants'" performance. Affected by geopolitical conflicts in the Middle East and between Russia and Ukraine, international crude oil prices fluctuated widely in the first three quarters of this year. The average price of North Sea Brent crude oil futures rose more than 27% year on year to $89 per barrel, while the average price of U.S. West Texas Intermediate crude oil futures rose nearly 26% year on year to $84 per barrel. The average selling prices of crude oil and petroleum liquid products for the "three oil giants" in the first three quarters rose broadly in line with international oil price gains, and combined with growth in oil and gas output, the upstream business contributed significantly to the companies' total profit growth. "Geopolitical maneuvering remains the core theme running through the crude oil market all year." CNOOC management said at a results briefing that, according to mainstream institutional assessments, the average Brent crude oil price this year is expected to remain in the $85-$90 per barrel range, with the main influencing variables currently focused on the repair progress of core Middle Eastern shipping lanes and the pace of production capacity recovery in Gulf oil-producing countries. It is worth noting that due to differences in business layout, the profit structures of the "three oil giants" have diverged somewhat. PetroChina and Sinopec, which both have upstream and downstream operations, saw their refining businesses become another important engine of corporate performance growth and contribute the largest year-on-year profit increase among all business segments in the first three quarters. In the first three quarters, PetroChina's refining, chemicals and new materials segment posted operating profit of 23.132 billion yuan, up 42.4% year on year, with the refining business accounting for nearly 80% of that operating profit, up about 25% year on year. Sinopec's refining segment saw earnings before interest and taxes surge nearly 330% year on year to 30.099 billion yuan. Regarding the performance growth, Sinopec said it was mainly due to improved price spreads for refining and chemical products, the company's efforts to increase production of high value-added products such as aviation kerosene, naphtha and refining by-products, and inventory gains brought by rising crude oil prices. Starting in the second half of the year, the bottleneck in the global energy system shifted from the upstream crude oil side to the refining segment. Disrupted by Middle East geopolitical conflicts, a systematic blow to Russia's refining system, and the continued clearing of outdated international refinery capacity, about 10% of global effective refining capacity was cut, refined product supply became tight and prices rose sharply. According to International Energy Agency (IEA) statistics, in mid-September, Singapore diesel wholesale prices exceeded $200 per barrel, while diesel wholesale prices in Europe and the United States reached a historic high of $220 per barrel. Diesel retail prices in most major economies also hit record highs. China's refined product exports became a major source of supply for the Asian market in the third quarter. Although global diesel prices fell somewhat in early October as crude oil landed costs and freight rates rose, the benchmark price was still nearly twice its pre-crisis level. The IEA expects the tight global diesel supply situation to possibly continue until 2027. Against this backdrop, leading Chinese refining enterprises with large-scale refining and chemical integration capabilities fully benefited from the recovery in product price spreads. In the first three quarters, the four major private refining companies Hengli Petrochemical, Rongsheng Petrochemical, Eastern Shenghong and Hengyi Petrochemical saw net profit attributable to parent companies rise about 104%, 802%, 3,573% and 3,391% year on year, respectively, to 10.26 billion yuan, 8.02 billion yuan, 4.64 billion yuan and 8.01 billion yuan. Regarding the profit surge, Hengyi Petrochemical management explicitly said at a results briefing that, benefiting from the long-term tight supply and demand pattern for refined products in Southeast Asia, the company, as the only leading domestic chemical fiber enterprise with an overseas refining and chemical plant, continued to see improving refined product profitability. Rongsheng Petrochemical also mentioned in its earnings forecast that overseas refined product market conditions were improving, processing spreads for the company's main products recovered markedly, and product gross profit levels improved. Amid the industry's high prosperity, risk concerns should not be overlooked. Sinopec Chief Financial Officer Shou Donghua warned at a results briefing that continued Middle East and Russia-Ukraine conflicts in the fourth quarter, with purchasing spreads, freight and insurance costs at historic highs, will pose significant challenges to the company's production and operations. "This profit largely depends on a high oil price environment." Dong Xiucheng, executive dean of the China Institute for International Carbon Neutrality Economy at the University of International Business and Economics, warned that once geopolitical tensions ease and oil prices fall rapidly, upstream earnings and refining spreads will quickly narrow, the inventory appreciation effect will reverse, and inventory write-downs may even occur. Dong Xiucheng believes that the long-term downward trend in refined product demand is inevitable and the replacement of traditional fuels by new energy is irreversible, so relying solely on oil price dividends will be difficult to sustain performance. In the short term, companies such as PetroChina and Sinopec may benefit from the energy cycle dividend, but in the long run they need to move away from the old model of profiting through refined product scale expansion and transform their industrial chains toward high-end chemicals, new materials and new energy. The stability of corporate profitability in the future will depend on the progress of new businesses such as new materials, hydrogen energy and CCUS, as well as the ability to control costs and optimize inventory amid sharp oil price fluctuations.
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