China's state-owned Sinopec said Friday that the refiner's trading arm, Unipec, suffered losses of Yuan 4.65 billion ($687.4 million) in 2018 as a result of "inappropriate" techniques applied to hedge positions at a time when crude oil prices were relatively lower.
"Further investigations have indicated that the misjudgment about global crude oil price trend and inappropriate hedging techniques applied for certain parts of hedging positions resulted in a loss..," a Sinopec statement said.
However, the statement added that Unipec had also saved Yuan 6.4 billion in crude import costs for its refineries in 2018 due to relatively lower oil prices.
Despite the losses, Sinopec and Unipec were maintaining normal production and operation, the statement said.
"The shareholders of the company and potential investors should exercise caution when investing in or dealing in the securities of the company," the statement added.
Sinopec in December had said in a circular that it had suspended Chen Bo, who was then president of Unipec, from his duties due to unspecified reasons, S&P Global Platts previously reported. Sinopec had also suspended Zhan Qi, the secretary of Chinese Communist Party Committee of Unipec.
Following the suspensions, Unipec's deputy general manager Chen Gang had taken responsibility of administrative work, according to the December circular.
Sinopec processed about 246 million mt of crude oil in 2018, 85% of which was imported crude oil, a separate press statement said. Total costs for the imports were more than Yuan 600 billion.
Sinopec's net profit was estimated at Yuan 62.4 billion in 2018, rising 22% year on year.
In 2018, the crude oil market was volatile. Brent and WTI crude oil futures hit four-year highs of $86.29/b and $76.41/b, respectively, on October 3, and then fell sharply to $50.47/b and $42.53/b, down by over 40%, according to the press statement.
