More than 60 people were killed when the Donghuang II oil pipeline, operated by China Petroleum & Chemical Corp., known also as Sinopec, exploded in eastern Shandong province.
The pipeline went into service in 1986. Sinopec published a statement saying corrosion weakened the walls of the pipeline, causing crude oil to leak into the municipal drainage system.
"After the leakage, rescue workers used hydraulic hammer[s] to break the concrete trench cover slab, and sparks ignited the vapor in the trench and caused an explosion," Sinopec said in a statement Monday.
Sinopec said it did not take full responsibility for safety at the site while provincial officials didn't identify the risks properly.
The company said the incident caused a direct economic loss of $123 million.
Chinese President Xi Jinping called for "large-scale safety check" following the incident.
The official Xinhua news agency reported Monday insurance funds would cover the damages.
Brent, WTI unable to hold rally
Producers call for end to oil export ban