Sinopec reported a 16% decline in its annual profit due to weak demand, indicating that China's oil consumption may be reaching its peak.

The company's net income for 2024 dropped to 49 billion yuan ($6.8 billion) from 58.3 billion yuan the previous year, according to the company's disclosure based on global financial reporting standards. This was lower than the analysts' expected profit of 56.4 billion yuan.

The decline in profit reflects Sinopec's operational difficulties, as oil usage decreased last year nationwide due to government policies encouraging refiners to produce more petrochemicals and less fuel. The growing popularity of electric vehicles has also affected diesel and gasoline consumption. The International Energy Agency predicts a continued decrease in demand for road fuels this year.

Sinopec's refining business saw a 67% decrease in operating profit to 6.71 billion yuan.

Despite a 3% average decline in global oil prices in 2024, with further drops in Brent crude this quarter linked to trade tensions and increased production at the urging of US President Donald Trump, cost savings for Chinese refiners were limited. Weakness in the nation's real estate sector, a significant source of demand, has discouraged processors from scaling up operations.

Moreover, the chemicals segment witnessed a 66% rise in operating losses to 10 billion yuan compared to the previous year.

China plans to maintain annual oil output at around 200 million tons while enhancing gas supply for energy security. Yet, the refining industry is anticipated to grapple with prolonged excess capacity, resulting in the closure of smaller, unprofitable processing units and fueling stations.

Cnooc, another major Chinese oil company, is scheduled to announce its earnings on March 27, followed by PetroChina on March 30.