Sinopec Q1 Profit to Reach a Record

Profit at Sinopec, China's largest oil refiner, may peak in the first quarter of this year as crude oil prices rebound, reducing margins from producing fuels at state-controlled prices, UBS AG said.

China controls gasoline and diesel prices to limit their impact on inflation, hobbling Sinopec's ability to profit from fuel demand in the fastest-growing major economy. The company, which imports almost three-fourths of the crude it processes, has forecast a more than 50 percent jump in first-quarter net income.

'Sinopec has been suffering from crude oil price risk, weak upstream fundamentals, a slowing marketing segment, and huge capital expenditure investment in refining and petrochemicals,'' the Hong Kong-based analysts wrote in the research note. ``The good first-quarter result is only driven by a lower crude oil price in the period December 2006 to February 2007.''

The company's shares, up 44 percent in the past six months, fell 2.5 percent to HK$7.10 by the Hong Kong market's 4 p.m. close, the largest one-day drop for a month.