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Sinopec's trading division lost $ 690 million in crude oil hedges in the fourth quarter as the Chinese oil group confirmed the damage caused by what it called "inappropriate trading strategies".
Unipec, its trading arm, was trapped when world oil prices fell after the Trump government's last-minute decision to grant Iranian customers waivers of sanctions against its oil exports, triggering a brutal sale in the fourth quarter that caused a sharp drop in oil $ 86 to less than $ 50 a barrel.
Sinopec announced at the end of December that it was suspending two executives, including Chen Bo, the ambitious director of Unipec, which provoked many speculations in the market that the losses would have been considerable.
The confirmation of a loss of 690 million dollars (4.65 billion rubles) represents one of the most important negation trades for a Chinese company, although it lies at the bottom of the industry speculation, which had reached up to 2 billion dollars.
"Investigations have shown that Unipec has been applying inappropriate trading strategies for hedging the crude oil sector," Sinopec said in a statement released on Friday at the Shanghai Stock Exchange. "Because of erroneous calls on oil price movements, [the company] losses on the hedging futures side when oil prices fell. "
Most traders and badysts in the sector expected a sharp rise in oil prices in the fourth quarter, as they expected US sanctions against Iran to tighten supply. It is likely that Unipec took a position in the futures markets allowing it to make a profit if the price of oil increased, although the details of its call were not made public.
Instead, just three days before the entry into force of the sanctions, the Trump Government announced that it would extend the waivers to eight countries that regularly supply oil, including China. .
Other domestic and international oil companies have also been affected by falling oil prices, said people familiar with the industry in China, but none as serious as that of Unipec.
Mr. Chen, a confident Anglophone who has often appeared at international industry events, has remained at the head of another publicly traded company, Sinopec Kantons, which manages storage, natural gas and transportation activities. .
People who are familiar with Sinopec said that he was well regarded by long-time leaders, but that society was ravaged by infighting at the highest levels as new leaders settled after a purge anti-corruption that had decimated the oil industry.
Sinopec announced Friday a net profit of 62.4 billion rubles (9.2 billion dollars), up 22% over the previous year, and 22% to 22.9 billion rand. In contrast, net profits of rival PetroChina more than doubled in 2018, reaching 51.8 billion rand, said PetroChina in a statement on Monday on the Hong Kong Stock Exchange.
In both cases, the listed company does not reflect all the operations of the parent company.
Additional report by David Sheppard in London
Twitter: @HornbyLucy
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