While China's refining industry is expected to suffer from the dual impact of the COVID-19 pandemic and plummeting oil prices, the sector is set to enjoy better times in the second half of this year as several major plants resume operations, industry insiders said.

In the first half of 2020, China's petroleum and chemical industry witnessed a 58.8 percent year-on-year profit slump to 141.6 billion yuan ($20.4 billion). Profit from the refining sector plunged more than any other segment, dropping 159 percent compared with the first half of 2019, said Fu Xianshen, vice-chairman of the China Petroleum and Chemical Industry Federation.

However, with effective measures to contain COVID-19 and an uptick in international oil prices, the private refinery sector is likely to embrace improved fortunes in the coming months.

China's refinery output went up 12 percent year-on-year in July, hitting the highest on record for any single month. It processed 59.56 million metric tons of crude oil, equivalent to about 14.03 million barrels per day, the National Bureau of Statistics said.

Throughput for the first seven months totaled 378.65 million tons, or about 12.98 million bpd, up 2.3 percent from the same period a year ago, it said.

Tang Sisi, an analyst at research firm BloombergNEF, said it is expected oil demand will remain healthy in the second half as road and domestic air traffic move toward normalcy, keeping China's crude demand at a high level.

"However, refinery run rates might get ahead of demand growth, leaving a surplus of oil products available for export," she said.

"Capacity additions will intensify the competition in the refining sector, with Sinopec's 200,000-barrels-per-day Zhanjiang Refinery fully commissioning, and the 400,000 barrels-per-day Zhejiang Petrochemical (Phase II) seeking test runs in the fourth quarter."

China-based Longzhong consultancy said run rates at independent refineries across China have fallen to around 70 percent this week from nearly 80 percent last month.

Tang said the impact of the pandemic highlights the importance of the natural hedge that comes from fuels and chemical integration. Boosting chemical yields has been shown to boost margins, with chemicals contributing 60-80 percent of combined margins for an integrated refinery with 40 percent chemicals output in the product slate.

The independent refining companies have reported more than satisfactory profits during the first six months of the year, amid the backdrop of international oil giants reporting quarterly losses due to the epidemic and tumbling oil prices.

State-run and independent refiners alike have ramped up crude purchases in previous trading cycles to take full advantage of ultra-low crude prices in the March-May period, a Platts survey said. This sent a bullish signal to the global oil market that the recovery in Chinese energy demand is again on track.

Li Li, research director at energy consulting company ICIS China, said the Chinese refinery sector has shown vitality and resilience, having seized the opportunity of low global crude prices to book orders.

As one of the four biggest private refining giants, Hengli Petrochemical saw its operating revenue up 59.11 percent year-on-year to 67.36 billion yuan in the first half of this year. It contributed to the boom in high utilization run rates and low-level inventories, while the PTA(purified terephthalic acid) sector also contributed to growth in net earnings.

Rongsheng Petrochemical, another big independent refiner, said its operating revenue reached 50.28 billion yuan during the first six months of the year, up 27.32 percent year-on-year.

In comparison, Chevron Corp reported a loss of $8.3 billion in the second quarter. ExxonMobil Corp logged a loss of $1.7 billion for the first half of the year, compared with a profit of $5.5 billion a year ago.

ExxonMobil Chief Executive Darren Woods blamed the global pandemic and oversupply conditions for the company's second-quarter financial results.

The NBS data also showed China's domestic crude oil output rose 0.6 percent last month compared with the same month a year ago to 16.46 million tons, or 3.88 million bpd. Output for the January-July period reached 113.5 million tons, up 1.4 percent over the year-earlier period.