China’s Sinopec ends five-year oil purchasing strategy after record fourth-quarter loss, sources say GlobeBusiness
CHINA STRINGER NETWORK/Reuters
Under the strategy, Unipec had raked in a total 16.6 billion yuan in net profit between 2014 and 2017, including a record year in 2016 at 6.17 billion yuan, according to Sinopec’s annual reports.The formula-based cost target, though, was blamed by two of the sources for driving speculative trades that led to a nearly $700-million loss for Unipec in the final quarter of 2018.
Unipec cut back its over-the-counter paper activities shortly after news of the fourth-quarter loss broke, said a trader active in derivatives. The sources declined to be named because of the sensitive nature of the matter. Sinopec declined to comment on the change in purchasing strategy.Adding in global oil products trading, crude oil for China’s independent refiners and liquefied natural gas, Unipec handled more than 7.3 million bpd of oil equivalent last year, on par with top independent trader Vitol SA.Over 2017 and 2018, Unipec was asked to buy crude at $1 a barrel below a weighted average of benchmark crudes U.S.
The trading executive said the trader would likely now be less active and less aggressive in benchmark spot markets such as Dubai and curb its exposure in Brent-WTI spread trades.
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