China Petroleum and Chemical Corporation (Sinopec Corp) is expecting a loss in its August chemical production after reporting huge refining losses.

Soaring naphtha prices and fierce market competition were behind the loss, an insider with the Sinopec Group, parent of Sinopec Corp, told Xinhua on Monday.

The company reaped little profit from its July chemical production, which would turn into loss in August, according to the source who declined to be named.

Last month, the price of naphtha, a raw material of ethylene, more than doubled from the start of the year to more than 1,200 U.S. dollars per tonne.

The more expensive naphtha led to a price increase in ethylene, but the rise could not cover the higher costs, he said.

This exacerbated the company's situation as its refining business was losing money because of a state-set fuel price and higher world crude prices.

The source said the company would lose more than 200 U.S. dollars from each tonne of imported crude oil it refined, even when the world crude price stood at 115 U.S. dollars per barrel. Nearly 80 percent of the crude refined by Sinopec in the January to June period was imported.

The world crude oil price had recently fallen to less than 120 U.S. dollars per barrel from its 147 U.S. dollar peak on July 11.

Dai Houliang, Sinopec's chief financial officer, said the government would continue to provide subsidies to the company in the third quarter, but it could decrease the amount because of falling world crude prices and an increase in domestic refined oil prices since June 20.

To ease the tight refined oil supply, central finance began to give a subsidy to Sinopec Corp and PetroChina Company Limited, the country's two major oil refiners. This was to compensate for losses arising from the imported crude oil processing and to refund the value-added tax imposed on refined oil imports of the two giants.

Sinopec's first-half net profit fell 73.4 percent from a year earlier to 9.34 billion yuan (about 1.37 billion U.S. dollars), despite receiving subsidies of 33.4 billion yuan.

The company forecast its net profit would decline by more than 50 percent in the first three quarters from a year earlier.