UPDATE 1-Thai Oil Q3 beats forecasts, weak margin may hit Q4

* Net profit 1.98 bln baht vs 1.68 bln consensus

* Q3 sales down 29 pct as prices of oil products fall

* Integrated margins at $4.4/barrel vs $4.1 loss

* Shares up 3 pct, outperform market after earnings (Adds details)

BANGKOK, Nov 6 - Thai Oil, the country's top refiner, reported a better-than-expected net profit in the third quarter, turning round from a loss a year earlier thanks to the absence of inventory losses this time.

After Friday's earnings announcement, its shares were up 3 percent at 42 baht at 0321 GMT, while the main Thai index was 1.6 percent higher.

But Thai Oil's earnings were expected to be weak in the fourth quarter as refining margins and its petrochemical business would come under pressure from new capacity in Asia, even if an economic recovery pushed oil prices higher.

"We expect Thai Oil to post a net profit of 1.1-1.2 billion baht in the fourth quarter. Without a stock gain and surge in oil prices, net profit should be lower than the third quarter," Trinity Securities said in a note.

Monthly refining margins at complex refineries in Asia fell to a three-year low in October due to strength of medium-heavy crude oil and increased supplies of light products, Reuters data showed.

Thai Oil, nearly half-owned by energy company PTT PCL, reported a net profit of 1.98 billion baht ($59.3 million), or 0.97 baht per share, for the third quarter versus a 5.8 billion baht loss a year earlier.

Ten analysts surveyed by Reuters had on average forecast a net profit of 1.68 billion baht for the July-September quarter.

Earnings fell 68 percent from 6.12 billion baht in the previous quarter, mainly due to a fall in gross refining margin, with no large stock gain because of new global supply.

Third-quarter sales dropped 29 percent from a year earlier to 78 billion baht due to a decrease in average oil prices and weak demand, Thai Oil said in a statement.

Its integrated margin, which includes its petrochemical business and the impact from oil inventories, was $4.4 a barrel in the July-September quarter, versus a loss of $4.1 a year earlier.

Its 275,000 barrel-per-day refinery ran at 101 percent in the third quarter, up from 94 percent a year earlier.

Thai Oil, which also operates a paraxylene petrochemical plant, planned to run at full capacity in 2010 because it can use some products to feed the petrochemical plant.

The refinery business contributes about 50 percent of its profit, while 30 percent comes from petrochemicals and the rest from its power and lubricant businesses.

In the past three months, the stock has risen 4.5 percent, slightly underperforming a 6.5 percent increase in the overall stock market. ($1= 33.39 Baht)