<div id="readability-page-1"><div>CLSA said in a report that since the outbreak of the Israel-Iran conflict in March, SINOPEC CORP (00386.HK) +0.020 (+0.445%) Short selling $47.69M; Ratio 41.421% has underperformed PETROCHINA (00857.HK) -0.020 (-0.182%) Short selling $112.86M; Ratio 31.247% and CNOOC (00883.HK) +0.460 (+1.719%) Short selling $281.73M; Ratio 17.013% by 29% and 18%, respectively. This reflects the divergence in underlying earnings among the &#34;three oil majors&#34; amid rising oil prices. The broker expects this divergence trend to persist as the announcement of 2Q26 results in August approaches. Its order of preference among Chinas oil giants remains PETROCHINA &gt; CNOOC &gt; SINOPEC CORP.With the average oil price reaching USD117 per barrel in 2Q26 to date (QoQ +44%), the impact on SINOPEC CORPs downstream business could be more severe. Its 2Q refining profit will be affected by the National Development and Reform Commissions slower adjustments to domestic gasoline and diesel retail prices, which will pressure refining margins as oil prices rise. In addition, the closure of the Strait of Hormuz has driven a sharp increase in very large crude carrier freight rates (averaging USD7.2 per barrel of oil equivalent since March, 5.2x higher than the 2025 average of USD1.4 per barrel of oil equivalent), adding extra costs to its crude imports amid rising oil prices. Against this backdrop, CLSA believes SINOPEC CORP could swing to an overall loss in 2Q26 (excluding inventory gains).CLSA noted that this will in turn affect dividend distributions for 2026. Benefiting from strong exploration and production earnings, PETROCHINA and CNOOC should record stronger operating cash flow, providing greater room to increase dividend payouts. By contrast, SINOPEC CORP may face pressure on operating cash flow due to downstream challenges, potentially affecting its ability to maintain dividend payouts in 2026. The broker pointed out that SINOPEC CORP has cut capital expenditure by 30% over the four years from 2023 to 2026, but this may still be insufficient given the current downstream operating environment.Overall, CLSA sees upside risks to the markets full-year earnings forecasts for PETROCHINA and CNOOC, particularly PETROCHINA, whose 1Q26 earningsdue to a one-month lag in realized prices for exploration and productionhave yet to reflect the positive impact of rising oil prices. The broker expects the upcoming 2Q26 results (to be announced in August) to deliver strong QoQ growth, reinforcing their robust earnings trajectory for 2026. In contrast, it sees downside risks to SINOPEC CORPs full-year earnings, as challenges in 2Q26 may affect market expectations for its 2026 earnings and dividend payouts.CLSA rated the H shares of all three oil majors as Outperform, with TP at HKD12 for PETROCHINA, HKD32 for CNOOC and HKD4.9 for SINOPEC CORP. (da/u)(HK stocks quote is delayed for at least 15 mins.Short Selling Data as at 2026-05-19 12:25.)</div></div>

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CLSA reports that SINOPEC CORP has underperformed compared to PETROCHINA and CNOOC since the Israel-Iran conflict, reflecting a divergence in earnings amid rising oil prices. The broker expects SINOPEC to potentially report a loss in 2Q26 due to downstream challenges, impacting dividend distributions. In contrast, PETROCHINA and CNOOC are projected to benefit from strong cash flows and increased dividends. CLSA maintains an Outperform rating for all three, with target prices set at HKD12 for PETROCHINA, HKD32 for CNOOC, and HKD4.9 for SINOPEC CORP.

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CLSA: SINOPEC CORP  Share Price Has Underperformed Peers Since Israel-Iran Conflict, Reflecting Fundamental Divergence; Sector Top Pick PETROCHINA