Mainland oil refiners saw their share prices fall yesterday after a cut in domestic petrol and diesel prices that some analysts said was a surprise. Other analysts disagreed, saying Beijing had been implementing a fairly transparent price-setting mechanism that linked domestic fuel prices to international crude oil price movements. Shares in Asia's largest oil refiner, China Petroleum & Chemical Corp (Sinopec), fell 5.04 per cent to HK$6.78, while PetroChina slid 3.9 per cent to HK$9.12. The H-share index fell 3.49 per cent. The National Development and Reform Commission yesterday cut petrol and diesel pump prices by 220 yuan (HK$249.57) per tonne, or about 3 per cent. Prices vary by region. A Credit Suisse research note said this round of price reductions would surprise the market as oil companies had earlier indicated that domestic fuel prices were at levels commensurate to a crude oil price of US$60 a barrel. This implied refiners were only operating at a slight profit, even though domestic refiners' crude costs can be about 10 per cent lower than international benchmarks for premium-grade crude as they are equipped to process lower-quality oil. The Brent benchmark price fetched about US$66 a barrel yesterday. Credit Suisse estimated Sinopec's profit margin would fall to between US$4.50 and US$5 a barrel in the third quarter from US$5.50 in the second quarter - the peak for the year. However, Citigroup analyst Graham Cunningham wrote in a note to clients that the government had indicated the new fuel prices were based on a reference crude oil price of US$64 a barrel. He estimated that it implied a refining gross margin of about US$7.80 a barrel. Sinopec is forecast to post a 69.6 per cent jump in net profit this year to 50.49 billion yuan from 29.77 billion yuan last year, according to the mean estimate of 27 analysts polled by Thomson Reuters. Its profits are expected to be primarily boosted by a marked turnaround of its refining operation, which was deep in the red last year despite government subsidies.