• We expect the credit profile of Sinopec, which is one of the three Chinese national oil companies (NOCs) to continue to be underpinned by its strategic role in China’s energy security and the resulting strong government support.

• That said, credit metrics could weaken in FY26 depending on the trajectory and duration of the Middle East conflict and the resulting impact on crude oil and gas feedstock costs, which may compress downstream and chemical margins.

• For clarity, our analysis is based on the financials of HKEX‑listed China Petroleum & Chemical Corporation (Sinopec Corp; 386.HK), which we use as a proxy for the credit profile of its parent, China Petrochemical Corporation, the obligor of the Group’s outstanding $ bonds (ticker: SINOPE).

• Sinopec Group is a Chinese integrated oil and gas (O&G) company and one of the largest globally and domestically, with businesses spanning exploration & production (E&P), refining, chemicals, and marketing & distribution.
• In 9M25, Sinopec Corp’s external operating revenues were mainly from marketing and distribution, which accounted for ~52.2% of total sales revenue and chemicals (~14.1%), while refining and E&P accounted for ~5.8% and ~5.6%, respectively. The corporate and others segment made up the remaining ~20.5%, including import and export trading, R&D, and centralized management activities.
• The refining segment purchases crude oil from both third parties and the Company’s E&P operations, processing it into refined petroleum products. Most gasoline, diesel, and kerosene are transferred internally to the marketing and distribution segment, while part of the chemical feedstock is supplied to the chemicals segment. The marketing and distribution segment procures refined products from internal and external suppliers and distributes to domestic customers through Sinopec’s nationwide wholesale and retail network.
• In 9M25, Sinopec’s total oil and gas production reached 394 mmboe, representing a 2.2% YoY increase, including 211 mn barrels of crude oil and 1,099 bn cubic feet of natural gas (+4.9% YoY). The average realized price for crude oil declined to $66.4/bbl (‑13.3% YoY), while the realized price for self‑produced natural gas eased to $7.14/thousand cubic feet (‑4.5% YoY).

Risks: Weaker-than-expected domestic demand, higher-than-expected crude oil and feedstock costs, particularly in a prolonged US-Iran conflict or broader Mideast escalation, elevated inventory losses, capex overruns or sustained high investment intensity, geopolitical and sanction-related headline risks.

Catalysts: inflow into China $ bonds, stronger-than-expected recovery in chemical product demand, sustained easing in feedstock or crude oil costs, policy-driven support for SOEs.