(Adds Cosmo Energy profit forecast revision, comment)
By Yuki Nitta
TOKYO, Feb 13 (Reuters) - Two of Japan’s biggest refiners said on Thursday their profitability is likely to be hit by the fall in oil prices caused by the coronavirus outbreak in China, which has dampened demand for commodities.
An executive at JXTG Holdings, Japan’s largest refiner, said the company was still assessing whether it will need to cut its annual profit forecast, while No. 3 refiner Cosmo Energy Holdings slashed its full-year profit expectations.
The Chinese province of Hubei, where the coronavirus outbreak started in December, reported on Thursday its biggest rise in the death toll yet, using a new diagnostic method, while Beijing sacked two local leaders over their handling of the crisis.
The spread of the virus has hit demand for commodities from copper to oil and roiled supply chains across many industries.
Brent crude, the global oil benchmark, has fallen by more than $14, or around a fifth, from its 2020 highs in early January, as the impact of the virus hit sentiment and demand for oil in China, the world’s biggest importer of the commodity.
Each $5 decline in crude oil prices could potentially reduce JXTG’s annual operating profit by 32.5 billion yen ($296 million), Senior Vice President Yoshiaki Ouchi told reporters at an earnings briefing, adding that it was too early to be precise on the impact.
“The outbreak may affect our supply chains in China or traffic use but so far nothing can be forecasted since the Lunar New Year holiday just ended,” Ouchi said, with the company maintaining its forecast for the financial year ending March 31.
“We are running branches in China with as few workers as possible,” he said.
The refiners’ profits for the nine months through December had already been hit by falling resource prices and lower margins before the outbreak.
JXTG said its operating profit dived 52% to 221.44 billion yen in the nine months ended December 2019.
Cosmo slashed its forecast for operating profit for the year to March 31 by more than half to 49.5 billion yen. Operating profit fell 37% to 50 billion yen in the nine months through December, it said.
Typhoons that swept through Japan last year and the U.S.-China trade war also hurt the company’s business, Senior Executive Officer Uematsu Takayuki told reporters.
“We expect to see the effects from the virus in many ways including from falling oil, jet and light gas oil prices,” he said.
$1 = 109.8400 yen Reporting by Yuki Nitta; Writing by Aaron Sheldrick; Editing by Tom Hogue/Sherry Jacob-Phillips/Susan Fenton