China Petroleum and Chemical Corporation, better known as Sinopec, reported a 28 percent decline in net profit in the first quarter of this year, mainly because of falling international crude oil prices.

Net profit was CNY13.3 billion (USD1.8 billion) in the three months ended March 31, the Beijing-based energy giant said in an earnings report released late yesterday. Operating revenue rose 6.9 percent to CNY735.4 billion (USD101 billion).

Sinopec had CNY210 million (USD28.9 million) of impairment losses because of lower oil prices, which led to a decline in the price of some inventories, according to the company.

In addition, Sinopec's investment income plunged 70 percent to CNY1.7 billion (USD227 million) in the first quarter from a year ago, with a loss of CNY3.8 billion due to changes in the profit and loss of the hedging business and a drop in the efficiency of some joint ventures, the firm noted.

Sinopec, China's largest refiner, usually keeps a crude oil inventory that meets a certain period of processing volume in advance to maintain smooth and safe production, with a usual cycle of two to three months. Global oil prices fluctuated widely last quarter, with Brent crude's main contract dropping to USD72 per barrel at the end of last month from a high of USD83 in mid-January, resulting in inventory depreciation.

In addition, domestic demand for refined oil fell 4 percent year-on-year in the first quarter, leading to Sinopec's oil price falling 5.2 percent to USD71.50 per barrel, the company said. The price of its self-produced natural gas dropped 3.5 percent to CNY1.91 (26 US cents) per cubic meter, it added.

These price drops contributed to Sinopec's profit before tax from exploration and development falling 8 percent, from refining plunging 65 percent, and from marketing tumbling 44 percent, which are three of the firm's four main businesses, the company pointed out.

Shares of Sinopec [SHA: 600028] fell 0.7 percent to CNY5.67 each as of lunch break in Shanghai today.