SINGAPORE (Reuters) – Sinopec (600028.SS) has suspended two top officials at its trading arm Unipec and is evaluating the details related to certain crude oil transactions that have incurred some losses, the Chinese state oil company said on Thursday.
FILE PHOTO: Unipec’s President Chen Bo speaks at the 34th Asia Pacific Petroleum Conference (APPEC) in Singapore September 24, 2018. REUTERS/Edgar Su
Unipec’s President Chen Bo, an industry veteran who helped the company become one of the world’s largest oil traders, has been suspended along with the senior Communist Party representative at the company, Zhan Qi, Sinopec said in a filing to the Hong Kong stock exchange.
“The Company was informed that Unipec incurred some losses during certain crude oil transactions due to the oil price drop. The Company is currently in the process of evaluating the details of such circumstance,” Sinopec said.
Reuters earlier reported Chen Bo and Zhan Qi had been suspended after Unipec suffered losses, citing five sources. Neither Chen nor Zhan could immediately be reached for comment.
Vice president Chen Gang has been appointed to handle the company’s administrative work, Sinopec added in the filing.
“The government inspectors were looking into the company’s operations for the past few years … one of the problems they found was the severe trading losses in the second half of this year because of wrong market judgment,” one of the sources said.
The sources did not refer to any wrongdoing on the part of the two men.
Benchmark Brent and West Texas Intermediate (WTI) oil prices CLc1 LCOc1 have fallen by about 40 percent since hitting their highest in four years in October, amid oversupply concerns as major producers ramped up output while the United States unexpectedly issued waivers that allowed countries to continue importing Iranian oil despite sanctions.
A sudden widening of WTI’s spread with Brent earlier this year also led to hefty losses at major traders.
Chen Bo, who rose through the ranks to take on Unipec’s top role, started the company’s liquefied natural gas (LNG) trading desk.
He also advocated boosting China’s crude oil imports from the Americas to help the world’s largest oil importing country to diversify its suppliers.
Oil traders said Chen’s removal could create uncertainty at Unipec.
“He’s been a key man in the oil trading industry in the past decade,” said a veteran oil trader in Asia.
Shares in Sinopec (600028.SS) closed at 5.25 yuan ($0.76) on the Shanghai Stock Exchange, the lowest in two years and down 6.7 percent from Wednesday.
“Sinopec’s stock has been performing badly in the fourth quarter,” said a Beijing-based equity analyst who cannot be named due to local stock exchange rules. The news today caused “a selloff and decline in prices,” the analyst added.
In October, Sinopec reported that third-quarter net profit fell from the previous quarter, after rising for five consecutive quarters.
For the first nine months of 2018, the company reported a loss of 5.47 billion yuan ($794 million) from foreign exchange rate changes and holdings in derivative financial instruments, according to financial reports issued in October.
In the first nine months of 2017, the company reported a gain of 1.13 billion yuan.
Of the 2018 losses, 4 billion yuan occurred in third quarter, according to Reuters calculations based on the financial reports.
Sinopec does not provide a breakdown for revenues at its trading unit.
Reporting by Chen Aizhu and Florence Tan in SINGAPORE, Olga Yagova in MOSCOW, Meng Meng in BEIJING and Meg Shen in Hong Kong; Editing by Richard Pullin, Christian Schmollinger and Mark Potter