Iran's warfare causes international oil prices to fluctuate, will the three oil giants face tough times?

Iran’s ongoing conflict directly impacts China’s A-share oil and gas sector.

Recently, the A-share oil and gas sector has experienced a historic rally. China National Petroleum Corporation (601857.SH), Sinopec (600028.SH), and China National Offshore Oil Corporation (600938.SH), the three major oil giants, hit the daily limit for two consecutive trading days from March 2 to March 3, setting a record in the A-share market. On the morning of March 4, all three companies experienced a sharp decline; during trading, Sinopec briefly hit the limit down, China National Petroleum fell by 9.5%, and CNOOC dropped over 8%, though the declines later narrowed.

From March 4 to March 9, the three companies showed a pattern of sharp correction, followed by continuous declines, and then a strong rebound driven by a surge in international oil prices. Among them, CNOOC was the most flexible, China National Petroleum was next, and Sinopec remained relatively stable. Their latest market values are approximately 23.65 trillion yuan for China National Petroleum, 846.5 billion yuan for Sinopec, and 20.61 trillion yuan for CNOOC. Notably, on March 9, their stock prices all rose to varying degrees, with CNOOC leading with a 7.09% increase, while Sinopec rose only 1.74%.

Subsequently, the three companies issued announcements regarding abnormal stock trading fluctuations, all warning that “short-term oil price volatility carries significant uncertainty” and advising investors to be cautious. The recent large swings in stock prices reflect this uncertainty. Given that the conflict in the Middle East cannot be resolved in the short term, this article will first review the performance of the three oil giants in 2025 and consider whether the outlook for 2026 might improve.

Revenue and Net Profit of the “Three Oil Giants” Both Decline

There are no complete annual reports for 2025 yet; we can only refer to the data from the first three quarters. The 2025 financial reports show that all three companies experienced declines in both revenue and net profit during this period.

China National Petroleum achieved operating revenue of 21.697 trillion yuan in the first three quarters of 2025, down 3.9% year-on-year; net profit attributable to shareholders was 126.2 billion yuan, down 4.9%. Sinopec’s revenue was 21.134 trillion yuan, down 10.7%, with net profit of 29.98 billion yuan, down 32.2%. CNOOC’s revenue was 3.125 trillion yuan, down 4.1%, with net profit of 101.97 billion yuan, down 12.6%.

The percentage declines don’t fully convey the scale. To be specific, China’s petroleum revenue decreased by 890 billion yuan (3.9%), and net profit was 6.5 billion yuan less (4.9%). On average, that’s about 17.81 million yuan less per day. Sinopec’s revenue fell by 2.54 trillion yuan (10.7%), averaging a daily decrease of 700 million yuan; net profit dropped by 3.92 billion yuan (32.2%), averaging about 391 million yuan less per day. CNOOC’s revenue declined by 135 billion yuan (4.1%), about 370 million yuan daily; net profit decreased by 14.7 billion yuan (12.6%), roughly 40.27 million yuan less per day.

As the industry leader, China National Petroleum bears the core profitability. In the first three quarters of 2025, it processed 1.041 billion barrels of crude oil, a slight increase of 0.4%, and produced 59.4% more new materials. Its renewable energy generation reached 5.79 billion kWh, up 72.2%. Cash flow was 343.1 billion yuan, up 3%, the highest among the three. Sinopec maintained growth in production, with oil and gas equivalent of 55.5 million tons, up 2.2%; natural gas production was 31.1 billion cubic meters, up 4.9%. Crude oil processing was 186 million tons, down 2.2%; chemical light oil increased by 10%. Total refined product sales were 171 million tons, down 5.7%, but cash flow reached 114.78 billion yuan, up 13%, showing resilience. CNOOC’s oil and gas equivalent was 578 million barrels, up 6.7%; natural gas increased by 11.6%. Cash flow was 171.75 billion yuan, down 6%. Its core advantages include low costs, light assets, and high dividends, giving it strong resilience against oil price fluctuations.

The key drivers and trends include a decline in oil prices. In the first three quarters of 2025, international oil prices fell approximately 18% year-on-year, directly suppressing upstream profits. Sinopec’s downstream refining and chemical sectors were most affected. This led to declines in revenue and net profit across the three companies during this period. Investor Shi Baogang believes that the overall decline in performance in the first three quarters of 2025 is mainly due to a sharp drop in international oil prices combined with weakening downstream demand, refining and chemical losses, and renewable energy substitution. Due to different business structures, the impact varies: Sinopec’s downstream segment is heavily weighted, suffering the largest decline from oil prices, demand, and overcapacity; CNOOC, being purely upstream, is highly tied to oil prices, with moderate declines; China National Petroleum, with its integrated industry chain, has upstream profits to support its bottom line, experiencing the smallest decline.

The Rise of New Energy Vehicles Is Making a Difference!

As a vital energy source for industry, oil is used in various industrial applications, but transportation accounts for a significant portion. According to the China National Petroleum Corporation (CNPC) and data from the National Energy Administration, the transportation sector is the largest consumer of oil in China, accounting for about 55%-58% of total oil consumption in recent years.

Within transportation, road vehicles—passenger cars, buses, trucks—are the main contributors, making up over 80% of road transportation fuel consumption. When translated into total national oil consumption, vehicles account for roughly 45%-50%.

With the widespread adoption of new energy vehicles (NEVs), the sales of traditional fuel vehicles are declining sharply. Data shows that in 2023, the number of fuel vehicles reached 309 million, an increase of about 10.8 million from the previous year, but the growth rate has been squeezed by NEVs. 2024 is a turning point: total fuel vehicles reached 314 million, still increasing, but net additions plummeted to 5.63 million, a 47.9% year-on-year decrease. Meanwhile, NEV sales increased by 10.99 million, surpassing fuel vehicle growth for the first time, marking the beginning of stock replacement.

In 2025, fuel vehicle additions were 7.8 million, while NEV additions reached 12.57 million, further squeezing space. For the first time, fuel vehicle sales fell below NEVs, with market shares of 49.2% and 50.8%, respectively. The stock of fuel vehicles is expected to peak and then decline steadily.

NEVs entered a rapid growth phase in 2021, with a 59.2% year-on-year increase, adding 2.91 million units. Over the next four years, incremental sales were 5.26 million, 7.31 million, 10.99 million, and 12.57 million units, with year-on-year growth rates of 67.1%, 55.8%, 53.9%, and 40%. Market share jumped from 2.6% in 2021 to 12.01% in 2025. Market coverage increased from 31.6% to 54%.

Looking at recent three-year sales, fuel vehicle sales have continued to shrink, and in 2025, NEVs surpassed them, leading to a complete shift toward electrification. China currently leads globally in NEV passenger cars, reaching 62.8% market share in January 2026, maintaining the top position worldwide. Domestic brands like BYD, Geely, and Changan dominate with about 90% market share in China. Industry experts estimate that in 2026, NEV penetration could exceed 55%-60%, with more than half of new car sales being NEVs.

Based on 2025 domestic mainstream standards, the average annual mileage for a typical gasoline car is about 15,000 km, with a combined fuel consumption of 7L/100km. The annual fuel cost for an average household gasoline vehicle is roughly 7,000–8,000 yuan. Calculating from 2023, with 3 million fewer fuel vehicles in 2025, total gasoline consumption would decrease by about 24 billion yuan annually, excluding oil used for maintenance. In the first half of 2025, domestic gasoline consumption fell by 4.6%, and diesel by 4.3%; combined, the three oil companies saw over 29 billion yuan in half-year profits decline.

Performance of the “Three Oil Giants” Remains Steady

Despite the impact of NEVs on their performance, the three oil giants remain the core suppliers of crude oil and natural gas, with irreplaceable strategic importance. The widespread adoption of NEVs will not threaten their survival but will cause structural and phased performance adjustments, pushing their transformation.

In the short term, sales and profits of the three companies have declined significantly. According to the People’s Daily, in 2024, NEV substitution of gasoline was about 28 million tons, with gasoline consumption down 3.1% year-on-year; diesel was squeezed by LNG trucks, down 4.8%. The main impact is a sharp reduction in downstream refined product retail and refining profits, with demand peaking and then shrinking. It is estimated that by 2030, demand for refined oil will be about 25% lower than its peak. Data shows that after NEV penetration exceeds 30%, gasoline demand could shrink by 40%, and the number of gas stations may decrease by about 20,000 by 2030.

The resilience of the three oil companies remains solid. Their diversified business structures include not only gasoline but also upstream exploration and production of crude oil and natural gas, which are more affected by international oil prices and output. Midstream operations include refining, chemical new materials (shifting toward high-end materials to offset declines in refined products). Downstream includes gas stations, convenience stores, catering, advertising, and natural gas retail. Internationally, assets and trade in overseas oil and gas help diversify risks from the domestic market.

In response to the impact of NEVs, the three companies are gradually transforming. As key state-supported enterprises, they benefit from policies, funding, and resource advantages, allowing greater flexibility. The transformation has already begun, with a new growth curve taking shape—such as charging and swapping stations. CNPC has over 5,000 charging stations and is building swap stations with CATL; Sinopec is accelerating the integration of oil, electricity, and hydrogen refueling stations, aiming to become China’s leading hydrogen energy company with plans for 1,000 hydrogen stations. CNPC and CNOOC are investing in wind and geothermal energy; CNPC’s wind and solar power generation increased by 70% to 3.69 billion kWh, new material output up 54.9%, charging and swapping volume up 213%, geothermal heating covering 12 provinces. CNOOC is developing offshore wind power. Meanwhile, the three companies are expanding into comprehensive energy services, including virtual power plants, V2G, energy storage, and multi-energy integration, shifting from “selling oil” to “selling integrated energy services.”

The performance in the first three quarters of 2025 does not indicate a “crisis” but rather the pain of transformation. This transition will be painful in the short term, with the refined product sector (gas stations, retail) continuing to shrink and profits declining, representing the most challenging phase. The three companies are gradually shifting from “oil product suppliers” to “comprehensive energy service providers.” Fortunately, they have strong fundamentals in upstream oil and gas, chemicals, natural gas, and overseas assets, supported by national strategies.

Overall, although recent geopolitical conflicts in the Middle East have caused short-term oil price fluctuations, the actual impact on China’s “Three Oil Giants” remains limited, with their core foundations still solid. China’s oil import sources are diversified. Through deep engagement in Russia, Central Asia, and Africa, the “Three Oil Giants” have built a resilient, diversified supply network, effectively reducing reliance on a single Middle Eastern route and enhancing supply chain resilience.

Business structure optimization provides a strong buffer. With domestic natural gas production rising and refining integration deepening, the “Three Oil Giants” have transitioned from pure exploration and production to comprehensive energy service providers. The high oil prices in upstream and stable cash flows downstream offset geopolitical cycle fluctuations.

National energy security policies assign them special missions. As central enterprises, the “Three Oil Giants” possess strong reserves and policy support, enabling them to respond calmly to external shocks. In summary, while geopolitical tensions in the Middle East persist, they are unlikely to alter the steady long-term growth trajectory of the “Three Oil Giants.”

This article is an original BT Finance piece. Unauthorized use, copying, dissemination, or modification is prohibited. Legal action will be taken against infringement.

Author | Meng Xiao

Author statement: Content quoted from external media