UPDATE 2-Fuel price hike eyed as PetroChina Q3 disappoints

* Weaker-than-expected earnings could bode ill for Sinopec

* Aims for more overseas oil and gas cooperation

* Q3 net profit 30.8 bln yuan vs 34.1 bln consensus f'cast

* Shares end down 3 percent before results in Hong Kong

HONG KONG, Oct 28 - Weak third-quarter earnings at PetroChina may bode ill for rival refiner Sinopec as a double whammy of regulated fuel prices at home and an uncertain outlook for crude oil could cut into margins.

Like Asian No.1 Sinopec Corp, which reports earnings late Thursday or early on Friday GMT, China's No.2 refiner PetroChina felt the impact after Beijing cut gasoline and diesel prices twice in the third quarter under its strictly controlled price regime.

At the same time, PetroChina and global peers such as Exxon Mobil and Royal Dutch Shell have been hit by a sharp drop in oil prices from their 2008 peak.

But analysts are upbeat on the outlook for the world's second-most valuable oil and gas producer after Exxon Mobil - provided Beijing raises fuel prices soon.

"We are going to see a relatively strong fourth quarter, assuming oil prices stay at this level," said Sanford Bernstein analyst Neil Beveridge. "It really depends on what the (central government) is going to do. They must be quick to raise prices when oil is up."

He added that if Beijing fails to raise gas and diesel prices, refiners like PetroChina could see a significant weakening of margins in the fourth quarter.

NATURAL GAS BOOST

With expectations that Beijing will raise natural gas prices from the start of next year, analysts are optimistic on the outlook for PetroChina, which produces over 70 percent of China's total natural gas.

"We expect things to improve as China is due to announce more fuel price increases come November if they are sincere at all about the refined product pricing reform," said Gordon Kwan, an analyst with Mirae Asset Securities.

PetroChina is expected to post net profit of 135.1 billion yuan ($19.78 billion) in 2010, up from an estimated 2009 profit of 113.8 billion yuan, according to consensus forecasts from 20 brokerages on Thomson Reuters I/B/E/S.

The firm said it will invest more abroad after missing forecasts for quarterly net profit.

"The international business will seize the favourable opportunity of low oil prices and actively develop our overseas oil and gas cooperation and continue to expand the operation scale of our overseas oil and gas operations," PetroChina said in a statement.

July-September net profit was 30.8 billion yuan ($4.5 billion) versus a restated 40.3 billion yuan a year earlier, according to a statement to the Shanghai Stock Exchange. It compared with a consensus forecast of 34.1 billion yuan from seven analysts polled by Reuters.

(For a graphic, click http://graphics.thomsonreuters.com/109/CN_PETRCN1009.gif)

While benchmark U.S. crude oil futures bounced to $68 a barrel in the third quarter, up from nearly $60 in the second quarter, they are still down from $118 a year ago.

PetroChina's average oil selling price fell 49.5 percent to $49.06 per barrel in the first nine months of this year.

Shares in PetroChina fell 3 percent on Wednesday ahead of the results, outpacing a 1.8 percent fall on the benchmark index . The stock gained 1.9 percent in July-September, underperforming Sinopec's 11.5 percent rise and a 14 percent increase on the Hang Seng Index.