Citigroup on Friday warned of an earnings "trainwreck" for China Petroleum & Chemical Corp., or Sinopec, (HK:386)(US:SNP) this year, saying the outlook for its chemicals and refining businesses has continued to deteriorate. Citi forecast China's largest oil refiner would report an per-share earnings drop of 38% in the second quarter from the first quarter, owing to inventory writedowns and growing refining losses.

Citi said China's regulators were late in increasing fuel prices, approving higher pump prices in March, or about a month behind the surge in international energy prices. On the other hand, Citi said, China cut pump prices in May and June, reacting relatively quickly to declines in international prices. Citi said it expects Sinopec's refining losses to rise in the second quarter and remain high in the third quarter, "as Sinopec's crude cost will take time to come down."

Citi lowered Sinopec's earnings-per-share forecast for 2012 to 0.61 yuan (10 U.S. cents), or 29%. The investment brokerages said that Sinopec's refining losses should begin to improve in 2013. Sinopec's shares traded 0.6% higher in morning trade in Hong Kong on Friday.