Sinopec: Long Wait for $100 Oil to Return

Asia's largest refiner, Sinopec Corp, said on Monday it expects prolonged weakness in global oil prices, forcing it to cut spending and turn more cautious about acquisitions.

"This year's oil prices won't be high. It will take a very, very long time for international crude prices to rise back to $100 a barrel," its chairman Fu Chengyu told reporters at the company's results briefing.

"Oil companies need to get used to operating and developing in a low oil price environment," Fu said. "We need to think more about cost reduction."

Sinopec on Sunday posted its first quarterly loss since becoming a public company in 2000, hit by a slide in global crude oil prices and flagging domestic demand.

Like many other oil majors, Sinopec has been hurt by a more than 50 percent fall in crude prices since June, with analysts saying that the drop has resulted in inventory losses at the company.

Sinopec said it will cut capital expenditure by 12 percent to 135.9 billion yuan ($22 billion) this year and put more emphasis on investment in quality and efficiency, like rival PetroChina (PCCYF) and others in the sector.

Sinopec has used almost all its high-cost crude inventory, with its current inventory averaging about $50 a barrel, Wang Xinhua, Sinopec's chief financial officer said.

Its inventory cost stood at about $78 at end-2014, Fu said, adding that it would be positive for Sinopec's refining business if crude prices stabilise at current levels.

Benchmark Brent crude oil futures were trading at around $54.80 on Monday.

Fu said it was not time yet for Sinopec to make any major overseas acquisitions because of oil price uncertainties.

But opportunities may emerge if oil price weakness persists, which would hurt cash flows of some producers - including some companies in Latin America, Fu said, without giving details.

Sinopec Corp's parent Sinopec Group was China's most acquisitive energy company between 2005 and 2012, spending tens of billions of dollars buying overseas oilfields and producers. But, like PetroChina, Sinopec has made few acquisitions in the last two years as Beijing pushes state firms to focus more on profitability and efficiency rather than expansion.

Sinopec will list its retail arm, but there was no timetable, Fu said, adding that there was disagreement among the retail firm's shareholders over the timing of a stock listing.

Sinopec signed a deal last year to sell a $17.5 billion stake in its the business, which includes 23,000 petrol stations across China, marking the country's biggest privatisation push since President Xi Jinping came to power about two years ago.

Reporting by Charlie Zhu