By Chen Aizhu and Judy Hua

(Reuters) -Chinese refining giant Sinopec Corp plans to maintain steady refinery output during the second half of 2023 as domestic fuel demand recovers, after reporting a 20% decline in interim profit because of lower crude oil prices.

Sinopec, the world's largest refiner by capacity, plans 127 million metric tons of crude throughput, about 5.04 million barrels per day, between July and December, versus 126.54 million tons during the first six months, the company said in a stock filing on Sunday.

"The Chinese economy is seen extending its recovery. Domestic refined fuel demand is looking up and natural gas demand will maintain growth and that of chemical products will rebound gradually," Sinopec said.

That will bring its annual throughput to 253.5 million tons for 2023, marking growth of 4.7% versus 2022, according to Reuters calculations based on company data.

Sinopec on Sunday reported a 20.1% fall in interim net profit for the first half of the year compared with the same period of 2022, to 35.11 billion yuan ($4.82 billion), on lower crude prices despite higher refinery output and growth in fuel sales.

Its revenue slipped 1.1% to 1.59 trillion yuan for the six months, although it recorded an 18.5% increase in total domestic and overseas refined fuel sales of 116.6 million tons.

China's fuel demand continued to recover in the second quarter after a 6.7% year-on-year increase in the first three months, with gasoline and aviation fuel leading the way as people travelled more.

Sinopec said its first-half domestic fuel sales rose 17.9% from a year earlier to 92.47 million tons.

Demand for diesel fuel, however, remained under pressure from an ailing property sector and as weakening merchandise exports curbed trucking.

Chinese refiners overall benefited from cheap crude oil supplies from Iran, Venezuela and Russia, as Western sanctions forced those producers to sell oil at deep discounts to keep revenue flowing.

Although state majors have shied away from Iranian and Venezuelan oil, Sinopec has been taking in Russian supplies, traders have said.

Sinopec produced 139.68 million barrels of crude oil during the six months, up 0.02% year on year. Its natural gas output gained 7.6% to 660.88 billion cubic feet (18.714 billion cubic metres).

The company's refining margin was 354 yuan ($48.57) per ton in the first half of this year, down 33.6% from a year earlier, it said.

Sinopec plans capital spending of 104 billion yuan during the second half of the year, 38.7% above spending during the first half, on oil and gas fields like Tahe in Xinjiang and Weirong in Sichuan, as well as refinery expansion at Zhenhai.

Sinopec has been exploring more geologically challenging reserves, like the Bazhong tight gas field and more shale gas acreage in Sichuan.

($1 = 7.2890 yuan)

(Reporting by Chen Aizhu and Judy Hua; Editing by Robert Birsel and Tom Hogue)